Affco's road to riches takes a new direction

By PHILIPPA STEVENSON

Affco is preparing to switch emphasis from the cost-cutting programme that took it from rags to riches to new profit-generating initiatives.

The company has made much of the success of cost reductions that were saving it $20 million annually and which helped turn its $72.8 million loss of 1998 into a $6.5 million profit last year.

Chief executive Ross Townshend said at last week's annual meeting that the restructuring programme which had identified $50 million in annual saving would continue.

"Ensuring we capture all of those savings is one way to ensure we maintain and improve our current margins regardless of irrational procurement market behaviour," he said.

But Mr Townshend said the company had also changed to "demand-led rather than production-pushed planning."

It would be making better use of its overseas marketing network of offices and joint-venture companies to identify markets "and secure orders to supply that demand," he said.

Mr Townshend said the move was leading to Affco's internationalisation, which involved sourcing product from countries such as South America, Australia, China and Europe, as well as New Zealand, to supply customers year-round.

After the meeting, chairman Sam Lewis defended what could be seen as a tardy move to market responsiveness.

Other industries were only just getting into it, it was not just the meat industry.

"This is about picking up some of the best brains from other industries and bringing them in and letting them flourish here," he said.

Mr Townshend said the company "just couldn't continue with the production planning methodology that is subject to whether the sun shines or it rains."

He said moves included selling Belgian, Dutch and Danish pork to Hong Kong, and Uruguayan beef, alongside New Zealand product, to Canada.

"That's a pretty substantial change in thinking for us. We've set ourselves targets about how much we will process offshore, how much we will source offshore."

An indication of the quantities possible, he said, was the new joint-venture abattoir in China, expected to begin operation next month. It would process 100,000 cattle while in New Zealand last year Affco's beef kill was around 370,000 head.