Allied Farmers posts 60pc lift in full-year profit as livestock division outperforms

Allied Farmers' livestock division had an improved result.

Rural services firm Allied Farmers reported a 60 per cent lift in net profit on an improved result from its livestock division, particularly in the second half, and further cost reduction.

The Hawera-based company said net profit was $2.2 million in the year ended June 30 versus $1.4m in the prior year. Pretax earnings were up 52 per cent to $2.4m, which was ahead of the guidance it gave in June when it forecast a 40 per cent gain.

Its livestock division reported a 20 per cent increase in earnings before tax to $2.7m. Livestock sales performed well with commissions up 25 per cent on the prior year, particularly in the second half due to higher levels of dairy herd sales, it said.

It noted, however, returns from the meat processing business were lower than the previous period. While volumes were consistent, turnover was 20 per cent lower due to the impact of a decline in international prices for veal and skins.

During the year, its livestock division established a livestock financing unit, initially focused on financing service bulls but then expanding into other livestock financing. While it started from a low business, the business is already profitable, it said.

The company said it cut its corporate costs by 46 per cent to $45,000 from $83,000. It also reduced its debt costs, replacing $600,00 of maturing bonds with a $550,000 three-year bond at a substantially reduced interest rate. In addition, holders of $1m of bonds maturing in September have all agreed to roll them over for a further four-year term, also at a reduced interest rate.

"We are delighted at this vote of confidence from the bondholders," said chairman Garry Bluett. He noted the strong result for the 2017 financial year made it possible to negotiate improved terms.

Looking ahead, the company said its expectations for the current year are for "careful growth" in the livestock business, tempered with a flat outlook for the meat processing business as overseas prices remain low.

Allied Farmers shares last traded at 9.4 cents and are up 62 per cent over the past 12 months.