KEY POINTS:
New Zealand's biggest meat exporter PPCS is about to begin a major restructuring of its business as it attempts to avoid a repeat of the $40 million loss it announced yesterday.
The company plans to adjust processing capacity to better match the supply of livestock.
Chief executive Keith
Cooper said there was a restructuring plan which would be implemented during the next three months but that it did not necessarily mean plant closures.
"It may just be how we operate those assets over the seasonal basis," Cooper said.
"Quite clearly the current configuration and cost structures won't be maintained going forward."
The persistently high value of the New Zealand dollar and global pressure on lamb and beef prices were largely responsible for the loss for the year to August 31 - last year's profit was $31.4 million.
Chairman Reese Hart said the failure to match processing capacity with supply had also hurt returns.
Those resulting lower returns had not been adequately passed on to farmer suppliers and therefore impacted on company profitability, he said.
The company hoped to be profitable again in the current financial year.
The strategy was to return to more traditional profit levels - of $20 million to $30 million - during the next two years.
Despite the loss PPCS said the underlying financial position of the company was sound and improving - this was including operating cashflow of $115 million, bank debt cut by 21.5 per cent to $208 million and inventory reduced by 23.1 per cent to $200 million.
The market forecast for lamb was improving, while beef was stable and venison expecting short-term strength, albeit with a risk of pricing beyond customer.
The current financial year had been planned on exchange rates similar to last year's averages, which were slightly below current levels.
The board's strategy for 2008 was to align processing capacity to the current national livestock supply profile and with the company's marketing requirements, Hart said.
A procurement plan launched in May would be enhanced, including long-term pricing options to match supply for a year.
"It gives us certainty of supply, enables us to better configure our processing assets and make market commitments and at the same time it guarantees processing space for that supplier," Cooper said.
Farmer suppliers needed to examine their own performance rather than only look for fault with PPCS, Coopers said.
"If they're disowning the product as it's loaded on to the truck in terms of the quality, supply chain, well then they're going to get the outcomes they've had to date.
"If they're prepared to take an interest in the product to the market place, produce the right product on a 12 month, or on an ongoing basis, make a commitment to the market place via the meat companies, they will influence a different model for the future of the industry," he said.