Affco posts fat first-half profit but outlook tougher

Meat company Affco today reported a fattened first half result today, but expects a slower second half as it competes for livestock and feels the pinch from the high New Zealand dollar.

Affco said its after-tax profit for the March year was $14.44m, up from $11.19 for the same period a year ago, a result it described as "pleasing given the high New Zealand dollar and competitive livestock procurement market".

While it said the result was "soundly ahead" of the same period last year which included a $2.6 million write down on intangible assets, the balance of its financial year was likely to fall short of last year's record second half.

"Cattle numbers are expected to be below the record kill levels last year and in addition a high exchange rate is also challenging revenue."

Affco's rival PPCS also reported its first half result this morning but said it was expecting a stronger second half year.

Affco said competition in the sector "will continue to be intense in the next six months and the company will remain focused and cost efficient to build on the first half result".

Affco which returned $20 million in capital to shareholders in October last year did not declare dividend but said it would address the prospect of resuming payouts later this year.

Elsewhere, Affco said Hamilton-based bobby calf processor Dairy Meats, which it purchased earlier this year had now been successfully integrated, "...and preparations are in place for the upcoming calf processing season".

Affco said its killing season to date had been assisted by a good 2004 lambing percentage and better than anticipated cattle numbers in the North Island.

"An improvement in market share has also assisted improved plant utilisation."

It also said its 70 per cent owned South Pacific Meats Plant near Invercargill had been completed in the first half of the season and would be commissioned in "the coming months".

Affco shares were down a cent to 39c by midday. They have traded between 22.6c and 50c over the past 12 months.

- NZPA