Cost savings drive Affco turnaround

By LIAM DANN primary industries editor

Listed meat processor Affco yesterday proved its year of restructuring had paid off with the announcement of a $16.2 million profit for the 12 months to September 30.

The big turnaround from a $12.3 million loss for the same period last year was driven by cost savings. Total operating revenue was down to $892 million from $993 million the year before.

Chief executive Tony Egan said it was a satisfying result.

"We told a lot of stakeholders last year that we planned to restructure and improve performance," he said. "The response we got was: Actions speak louder than words."

Hopefully, the result proved the company was back on track, he said.

The company's restructuring costs were $3.9 million in a year during which the head office was downsized and moved from Auckland to Hamilton.

Changes in marketing structure also brought cost reductions.

While there was more work to be done, the restructuring process was nearly complete, Egan said.

The focus would shift back to expansion and earnings, he said.

The reduction in gross revenue was largely due to the strengthening New Zealand dollar, chairman Sam Lewis said.

Affco had increased the volume of animals processed in the past year, he said.

Despite the return to profit, no dividend was issued.

There were still big challenges in the year ahead, Lewis said.

The most serious was likely to be procurement of lambs, as a poor spring has cut stock numbers at a time when processing capacity and competition between meat companies was more intense than ever.

Yesterday's result completed a set of positive performances from New Zealand's four largest meat firms.

Hawkes Bay-based Richmond announced an annual profit of $12.9 million, compared to a loss of $6.5 million the previous year.

South Island co-operatives PPCS and Alliance also announced good returns based on strong lamb prices and higher processing volumes.