'Amateur' gets Affco back to basics

By PHILIPPA STEVENSON agricultural editor

The big corner office with its sweeping views of downtown Auckland on the 14th floor of Affco House is empty.

It has been that way since the sudden departure in February of its last occupant, flamboyant former Affco chief executive Ross Townshend.

The symbolism is deliberate, says executive chairman Sam Lewis, champion of a back-to-basics culture for the company he believes was brought to its knees by extravagance.

In May, Affco reported a poor interim profit after tax of $752,000 - down 90 per cent on the $7.4 million of the previous corresponding period.

Mr Lewis says of the empty office: "It is to make people think of getting on and doing the job for me."

His own, more modest room is next door. Several other offices in executive row are also empty.

Since Mr Townshend's exit just days after an upbeat annual meeting, Mr Lewis has sliced through the meat company's head office staff like a butcher cutting waste from an overfat carcass.

The results of the culling are dramatic. Last year's annual report recorded 65 employees paid more than $100,000. This year's is expected to show no more than 16.

Mr Lewis is reluctant to tally all the people made redundant. The only figure he gives is for 11 axed top executives.

He talks instead of redundant office space. "There are now nearly two floors empty in this building."

Sales, marketing and logistical support staff now fit on one floor when they used to take up four.

Mr Lewis has reportedly told farmer shareholders that costs have been cut $9 million in seven months.

Most of that would undoubtedly be salaries, but meat trading subsidiary Mathias Meats has also been jettisoned - sold to its management and other investors for what is said to be a fraction of the price Affco paid in 1996.

Mr Lewis denies the conjecture but concedes that no one rushed to buy the company - an indication the price was not significant.

Mathias Meats was purchased by Affco during former chief executive Don Manson's time to create competitive tension with Affco's own marketing department.

The subsidiary delivered profits of about $1 million a year, but apparently not the margin to meet the stringent requirements Mr Lewis wants from his back-to-basics approach.

The philosophy means concentrating on things the company does well - buying livestock, processing it, getting it quickly to the market and selling it, he says.

Mr Lewis, an Otorohanga farmer, is proud of his achievements at the helm of the big public company, which some doubted he was suited to manage.

He pointedly remarks that the significant cost cutting has been "done by an amateur".

It has meant examining the minutiae, working through weekends to ensure he has inspected every company account.

Other assets have gone on the block, including 30ha surrounding the Rangiuru plant in the Bay of Plenty - sold after being deemed unnecessary as a buffer between the plant and its neighbours.

In last month's supplier newsletter, Mr Lewis wrote that Affco's board and management had "no illusions about the need for the company to be competitive with smaller and currently more efficient operators in the meat industry".

Industry history demonstrated a need for the most cost-effective structures and processes to ensure survival in a sector characterised by high costs and low margins.

"Affco is the only New Zealand meat processing company which operated prior to 1950 and is still in existence today," he said.

"Acquisitions and rationalisations have had a massive and largely adverse impact on plants, regions and employees."

A review of operations means the Wairoa plant's cutting room will get a two-stage $4.5 million revamp, the slaughter board at Imlay in Wanganui will be replaced and hot boning will be introduced at Rangiuru.

The company is also said to have sharpened up its stock buying at a time prices are high.

Little wonder that Mr Lewis welcomes last week's $6 million investment by Motueka fishing and food company Talley's Group. And the company plans next month to tap shareholders for an undisclosed sum in a cash issue.

"Every dollar we don't have to borrow off the banks is a dollar appreciated here," says Mr Lewis.

Although the head office door has been swinging mostly outwards in recent months, it has allowed one entrance.

Chief operating officer Tony Egan joined Affco and its eight processing plants in July, fresh from the single-plant Waikato beef processor Greenlea Premier Meats, where he was marketing and finance managing director.

Mr Lewis is adamant he is Affco's only public mouthpiece on company performance.

But he lets Mr Egan say a few words "to bring discipline and ensure a consistent message".

Mr Egan repeats the back-to-basics mantra, adding his own interpretation.

"We're not keen on mountain hoppers," he says, defining them as "people who go from one big project to another and complete nothing".

"We're big on completion."

Affco, one of the top four New Zealand meat companies with 3000 employees, is "using a small company philosophy to run a big company", he says.

The approach is likely to spell the demise of Mr Townshend's trumpeted policy of "internationalisation".

Mr Lewis says the "fancy name" for year-round trading has gone "but we are continually refining our sales and marketing organisation".

The company's South American office, which consisted of only one meat trader, has been closed.

The staff member is back in New Zealand, now working for Mathias Meats on the same trade.

The flagship of "internationalisation", the China-based Affco Golden Ox plant in Sichan, has struggled to get stock to keep it running.

But after visits by the company's client services manager, Doug Lineham, and director Tim Saunders there is more confidence the problem will be solved, Mr Lewis says. But it is not top priority.

"When we get the operation running well here, we'll look at China.

"The potential for the company is enormous and once we fully get all that out and realised, we can move on to other things.

"We've identified some exciting challenges for us to pursue this year and next year."

One of them may be to fill that corner office.