Fat carved off meat firms'pre-tax profit

By Libby Middlebrook

Limited stock availability and more competition have halved the profits of New Zealand's largest meat processor.

Operating profits for Hastings-based Richmond, before restructuring costs and tax, were $5.9 million for September year, 53 per cent lower than the previous year's $12.5 million.

Chief executive John Loughlin said increased competition in the market from other meat processors and a fall in stock numbers were responsible for the result.

"I think we were surprised by the extent of the competitive pressure and we took some time to make the adjustments to lift our lead. It's been a really competitive year, with stock numbers down and more pressure to secure numbers.

"Our business is driven by volume and margin and when the volume's down it affects everything. We ran our business significantly better in the second half than in the first half."

An improved performance during the second half lifted operating profits to $8.8 million from losses of $2.9 million in the first two quarters.

Richmond, which took over processing companies Lowe Walker and Waitotara Meats earlier this year, had after-tax losses of $852,000 compared with a $4.6 million profit in the same period last year. Restructuring costs of $6.6 million relating to the closure of several processing plants contributed to the poor result.

Sales revenue was up 29 per cent to $892 million ($693 million last year), while earnings a share were down 84 per cent to 2.7c (16.5c).

Mr Loughlin said that although shareholders would not receive any dividend for 1998/1999, the company expected to boost earnings in the new year.

"The start for this year is showing some positive signs and I would be very disappointed if we don't lift our performance quite significantly."

* A second consecutive year of drought across much of the South Island's east coast halved pre-tax profit at Dunedin-based meat processor PPCS to $14.6 million in the August year.

The result, which compares with a $28.7 million pre-tax profit the previous year, had been anticipated after "various measures" to support drought-stricken farmers, chief executive Stewart Barnett said.

As a farmer-owned cooperative, PPCS had dual obligations of maintaining profitability and looking after its suppliers.

"We deliberately kept our schedules higher than normal because of the pressures on the farming communities out there," he said.

Mr Barnett was positive about the new season.

A review of PPCS' processing plants would transfer more capacity closer to the most highly stocked areas. This would reduce cartage costs and improve profitability.