Affco about-face stuns market

By PHILIPPA STEVENSON agricultural editor

The shock resignation of Affco chief executive Ross Townshend five days after the company's annual meeting has caused speculation that the 98-year-old meat company might be facing renewed difficulties.

There was no hint at last Wednesday's meeting that Mr Townshend, aged 47, would quit. His move has stunned shareholders and analysts.

At last week's meeting he said many of the problems he inherited two and a half years ago had been resolved "enabling my team to turn our attention to developing Affco's full potential."

Company chairman Sam Lewis yesterday denied that the resignation suggested a return of the financial problems that saw Affco lose $72.8 million in 1997-98.

He declined to comment on rumours that the company, which has had two profitable years since then, had been slow to pay bills for livestock cartage and other services in recent weeks.

But one industry observer said he understood that Affco, which like most in the meat industry operates on fine margins, had taken "a double whammy" when towards the end of last year it placed United States beef exports in bonded storage after New Zealand's quota had run out.

As well as missing the US Christmas trade and paying for storage, the company had to pay out on the producer contracts it had offered for stock, he said.

But Mr Lewis said it was business as usual.

"Everyone round here has got their head down working hard, and shareholders should be reasonably happy about that."

Mr Townshend, who left a career in the dairy industry for the $870,000 Affco job, yesterday refused to add to the company's statement.

Asked about speculation that he might contemplate a position with the proposed Global Dairy Company, he said: "I think I'd just like to rest for a while."

Affco said the resignation would take effect from April 30. Until then, Mr Townshend would focus on operations in Argentina, Australia and China.

Mr Lewis will act as executive chairman until a new appointment is made.

The company said Mr Townshend had joined Affco in 1998 as a "change manager, and the bulk of that change is now complete."

He had seen the company through a particularly tough period in which restructuring had taken Affco from a loss to solid profitability, and its share price had doubled.

Hugh Green, of 10 per cent shareholder Green & McCahill, said he had faith in the company.

"Just because you lose the captain, you don't sink the ship," he said.

Cavill White analyst John Cairns said the news had taken the sharemarket by surprise. Affco's share price dropped 2c to 38c yesterday.

Mr Townshend was perceived as a very important figure in driving change within Affco. He was highly regarded by the Affco board and increasingly by the industry for implementing change and making the business more demand-led, Mr Cairns said.

Shareholder Brian Chamberlin, who thought better of complaining about a lack of dividends from the company after Mr Townshend explained its international strategy at Wednesday's annual meeting, was also surprised.

"I simply didn't detect anything. In fact, it looked as though he was on top of his job."

He said he took the company's hype with a grain of salt after noting that talk of improved performance over the past 12 months was much the same rhetoric as that used a year earlier.

Waikato farmer Lloyd Downing, a member of Affco's farmer advisory board, said he was shocked by the resignation.

Nothing had been mentioned to his board, which had a special briefing with the chief executive before last Wednesday's annual meeting.

Some industry commentators were less surprised, saying they thought that Affco had endemic problems.

The company had worn out some competent executives including Jeff Jackson, who left in 1993, also after two and a half years.

Like Mr Townshend, he had closed plants and made workers redundant in an effort to stabilise the company.

His successor, Don Manson, was followed by Mr Townshend in 1998.

Mr Townshend rebuilt Affco's communications strategy, profit performance and capacity, marketing, and strategic planning. He modernised work practices and gutted the company of excess processing capacity in a $70 million restructuring.

He pruned meatworks and workers, and arranged a $65 million cash injection from rural financing group Farmers Mutual.

By slashing the 196 trucking companies and 50 export freight forwarders with which the company was dealing, he had achieved savings of $5 million a year.

Six months into the job, Mr Townshend, a part-time deer and dairy farmer, said he was amazed at the similarities between the dairy and meat industries.

His view then was: "Perhaps I might be able to bring some new thinking to what has historically been a pretty staid and conservative meat industry."