Robust balance sheet, investment and profitability key focus for SFF

As the biggest meat processor and exporter in the country, Silver Fern Farms annual profits are of interest to all in the industry.

Todays result of a net operating loss of $800,000 is disappointing especially when compared with its fierce competitor the Alliance Group.

The spin doctors took a positive view on the amount of debt this company has repaid this year, and the resulting improved equity postion.

They are also positive for this coming year, but with a reduced supply of animals from the spring storms and Alliance returning good dividends and pool surpluses, market share will be difficult to maintain.

Silver Fern Farms has reported a net operating loss before tax for the 12 months ended 30 September 2010 of $800,000 (2009 profit $5.4m) from total revenue of $1,810m (2009 $2,014m). In addition, one-off extraordinary restructuring costs of $7.2m were incurred. Silver Fern Farms’ Chairman Eoin Garden says that, despite an operational loss, the robust balance sheet – with 61.3% equity ratio and dramatically reduced working capital
borrowings, down to $117m – now enables the company to focus on delivering long term profitability from its “plate to pasture” strategy.
 

“It has been a tough, but successful three years, with the company reducing debt by $215m since August 2007, closing three plants and six lamb chains and exiting the Brooks of Norwich operation in the UK, as it no longer added value to the product.”  This year’s statutory accounts for the 13-month period shows $14.0m net loss (including non-recurring items) after tax, having accounted for two Septembers. September is a loss-making month in the industry’s business cycle, because of the low activity and high  fixed cost nature of the business.
 

Total debt was reduced over the period by $67m to $117m as the company refinanced its banking arrangements, as well as repaying the $75m SFF030 Bond on 15 November 2010. “The company is now in a strong financial position, for the future. Through FarmIQ, we are
increasing investment in the future of the industry so we can deliver sustainable levels of profitability to our supplier shareholders in the medium and long term. We are investing capital into areas such as processing technology, on-farm advancements and a market-led model, so we can improve company profitability and drive greater returns back inside the farm gate. Silver Fern Farms has a long history of strategic capital expenditure and, during the past 10 years, has spent more than $250m on capital projects, including $23.6m in the past financial year.”
 

Silver Fern Farms’ Chief Executive Keith Cooper says the 2009/2010 trading environment was challenging. “We were working with an appreciating and volatile exchange rate, coupled with reduced lamb numbers – and this put pressure on margins. “It is of little comfort that we, as a business, have sub-optional margins, but it is more concerning that our farmer supply base is yet to achieve sustainable profitability.”