Dollar's volatility takes edge off good returns

By LIAM DANN


A cruel twist in the fluctuation of the dollar last season knocked the top off profits in what was otherwise a good year for meat producers, says Alliance Group boss Owen Poole.

The Southland-based co-operative Alliance yesterday reported a net profit of $31.9 million for the year to September 30 - down nearly $6 million on the year before.

Dry conditions meant a high volume of stock was processed while the dollar was rising - from October to January.

By February, when the dollar was falling, South Island meat companies were unable to cash in because most of the killing was already done.

Alliance Group is primarily a sheep-meat company. Poole said although international demand for sheep meat was strong, meaning prices were high, the overall kill for the year was down by 1.2 million.

That had affected the company's ability to offset currency costs.

Beef prices were also strong but the weather had brought similar processing patterns to those for sheep meat.

"Every year is an unusual year so we're not making excuses. But in the context of some of the difficulties we've faced, we think it's a reasonably strong performance," Poole said.

Total revenue for the year was $1.12 billion, down slightly on the $1.4 billion the year before.

History appears to be repeating itself this season with the dollar again tracking up towards 70USc just as the season starts.

Poole said that was a concern, but it was something meat companies had to live with.

Alliance is investigating other ways to offset the currency, such as adding value to lower-value products and improving efficiency.

Meaty profits*

Alliance: $31.9 million (turnover $1.12 billion).

PPCS Richmond: $27 million (turnover $2.2 billion).

Affco: $58 million (figures due on Friday. Turnover in 2003 was $1.1 billion).

*(after-tax)