KEY POINTS:
Meat exporter PPCS has reported a net annual loss of $40.3 million, down 229 per cent from a year earlier, after being hit by a "persistently strong" New Zealand dollar.
The result for the year to the end of August compares with a net profit after tax in the previous year of $31.4 million which included a net gain of $17.7 million from a non-recurring item.
Total operating revenue fell 9 per cent to $1.85 billion from $2.03 billion, the company said today.
Along with the strength of the NZ dollar, PPCS said it was also affected by global pressure on the returns on a wide range of PPCS export products.
PPCS chairman Reese Hart said that despite unsatisfactory profitability for the year, the underlying financial position of PPCS was sound and improving and all other key PPCS financial indicators showed a positive trend.
The past year would go down as a difficult one for both PPCS and the wider meat industry, he said.
Through the main procurement and sales period between September 2006 and July 2007, the NZ dollar appreciated 18 per cent against the euro and 28 per cent against the US dollar.
That represented a change in lamb revenues of up to $14 per lamb, Mr Hart said.
"The result was also impacted by fixed cost structures in processing capacity that were not aligned to the current livestock supply profile and the impact of a depreciating market on the company's historic inventory levels."
A year-end rebate would not be paid for the period from January 1 to August 31 given the company's current profitability.
The strategy for 2008 was to "right-size" the business so it was aligned to the current national livestock supply profile and the company's marketing requirements.
PPCS would also be changing the current industry model of supply commitment on a week-by-week basis towards the longer horizon needed for marketing products internationally.
PPCS would look to increase its higher value chilled business by 7.5 per cent in the coming year, Mr Hart said.
"PPCS will also place particular focus on measures to improve lamb returns including enhancing our Silver Fern branding programme and developing new concepts in retail-ready portion-controlled packs.
"These consumer-ready items will be based on cuts from lamb legs that in time will see greater demand for heavier lambs, enhancing farmer returns per lamb."
The PPCS board has a clear strategy and commitment to return the company to its traditional profitability during the next two years, he said.
"In the coming 12 months, PPCS will make further substantive change to the business with the objective of delivering a much improved business model and an improved balance sheet."
In the latest year earnings before interest, tax, depreciation and amortisation (ebitda) were $13.3m, compared to $75.8m the year earlier.
Earnings before interest and tax (ebit) were down to a deficit of $15.1m from a $43.7m surplus the year before.
PPCS, which owns 25 processing plants and employs about 9000 staff in the peak of the processing season, is a fully farmer-owned co-operative.
- NZPA
