KEY POINTS:
Improved market returns, operational performance, cost reductions and efficiency initiatives have turned loss into profit at meat processor Affco.
Revenue for the six months ending March 31 was $496.7 million, down slightly on $499.3 million the previous year, while net profit was $10 million - a dramatic turnaround from an $18.8 million loss.
Planned improvements in operations and sales activities are progressing well, with benefits to become increasingly evident in later reporting periods, the company says.
"Labour supply remains the key constraint to capacity and profitability, and has been highlighted throughout the extended dry period," Affco says. "These shortages led to heavy livestock bookings over the summer and created a processing backlog which placed pressure on our farmer suppliers."
The strong New Zealand dollar had hit new post-float highs during the period and continued to affect market returns.
Dunedin processor PPCS is making headlines as its restructuring programme hits top gear, with plant closures and the always unwelcome job losses.
Affco has 10 plants and has already been through a restructuring programme itself in the recent past with no plans for any further rationalisation.
PPCS says its aggressive action aims to restore profitability and the company has already posted a profit for the first half of this financial year and cut its debt by $63 million, having posted a net loss for the full year ending August last year of $40.3 million.
The mega merger proposed by co-operative Southland-based Alliance Group, which would likely have included PPCS and Affco, fell over in April after a failure to reach agreement with PPCS. Merger talk will bubble away below the surface and return to the top of the agenda at some point. Fitter, leaner and profitable pieces will make assembling an industry jigsaw an easier task with less baggage and issues to haggle over.
But on the flip side improving international market prices, processor profitability and over the gate returns to farmers might weaken the desire and immediacy of taking action - less crisis less urgency.
FREE TRADE EXPORTS
Fonterra has signed an agreement to supply nutritional milk powder to a large multinational customer directly from New Zealand, the dairy co-operative said in a submission to the foreign affairs, defence and trade committee.
The agreement is expected to generate more than $300 million in revenue during the next four years and came comes within weeks of the signing of a free trade agreement with China.
The value-add products would be manufactured in factories in New Zealand factories.
"Without the FTA with China, lower priced product from NZ would almost certainly have been processed offshore in Asia," Fonterra says.
"This agreement greatly strengthens the relationship between New Zealand and what will soon be the world's largest economy, and positions us well to take advantage of China's extraordinary growth."
FIGHTING HUNGER
Agriculture and Fisheries Minister Jim Anderton will lead a delegation to a World Food Security conference in Rome this week.
The United Nations' Food and Agriculture Organisation is hosting the event which it says is a historic chance to re-launch the fight against hunger and poverty, and boost agricultural production in developing countries.
Anderton has been nominated as a vice-chairman representing the Southwest Pacific region at the conference, which will be attended by about 2500 people, up to 60 heads of state or government, 127 ministers and UN Secretary-General Ban Ki-moon.
"The Labour-Progressive Government believes we have a humanitarian obligation to assist the developing world in meeting the food security challenge and we will be pledging our support for this next week," Anderton says.
"The variable weather that results from climate change poses huge new challenges to food security, and as an agricultural producer New Zealand has a strong interest in the global community taking action to reduce climate change."
The New Zealand delegation will include Niwa climate scientist Jim Salinger, Fisheries Ministry chief executive Wayne McNee and Green MP Sue Kedgley.
Pressure from growing populations and the increasing affluence in emerging economies will place ever greater strain on the sustainability of global food production, Anderton says.
"New Zealand believes that unsustainable food production to meet short-term food needs is ultimately futile as it is creating a 'debt' with the planet that can never be paid back," he says.
"The challenges for humanity on these issues are enormous and the global community is going to have to work together very closely to ensure the world's food needs can be met without the biological systems upon which we depend breaking down."
Bilateral meetings will also be held with ministers from a number of trading partners.
