Weak red meat export prices cut Silver Fern Farms’ revenue by 15 per cent

Silver Fern Farms chief executive Dan Boulton.

A slump in red meat export prices has plunged Silver Fern Farms into the red.

The Dunedin-headquartered meat company released its full-year results to December 31, 2023, reporting a $24.4 million loss with revenue down nearly $500m to $2.78 billion.

It compares to 2022′s net profit of $189.3m with revenue of $3.27b.

Silver Fern Farms Ltd, which trades as the operating company, had earnings before interest, tax depreciation and amortisation (Ebitda), including share of associate earnings, of $16.4m, compared to last year’s $301.3m.

Meanwhile, Silver Fern Farms (SFF) Co-operative, which jointly owns Silver Fern Farms Ltd with Chinese-owned Shanghai Maling Aquarius, also posted a loss of $10.7m over the 12-month period.

Neither the operating company nor the co-operative will pay a dividend for the year.

Silver Fern Farms is NZ’s largest meat processor, killing sheep, beef and venison at 14 plants nationwide.

Tough out there

During the year, red meat prices, particularly lamb, have been under significant pressure, largely from softness in China and Australian product flooding markets. 

The latest figures from the Meat Industry Association show that red meat exports dropped 8 per cent in January to $759m, the lowest result since the same time in 2019. Within that, exports to China dropped 21 per cent year-on-year to $263m.

However, exports to the United States were up 10 per cent to $182m, and to the United Kingdom by 34 per cent to $38m.

SFF co-op chair Rob Hewett said “depressed” consumer confidence across its key markets had pressured its customers, the operating company, and “ultimately, returns for our farmer suppliers”.

“We also felt the impact of one-off events throughout the year, such as Cyclone Gabrielle, which caused damage and disrupted operations at the Dargaville and Pacific (Hawke’s Bay) processing sites for a number of weeks.”

After several years of strong performance and record returns to shareholders, Hewett said it was disappointing not to be in a position to pay dividends. But he was confident in the company’s ability to recover when market conditions become more favourable.

“The board regularly reviews the strategy and is confident that Silver Fern Farms’ strategy and direction of travel is the right one. However, the business must continue to adjust to the market conditions we are currently facing,” he says.

Cost management

Chief executive Dan Boulton, who recently took over from Simon Limmer, said the company had focused on reducing operating costs and made “difficult but necessary” calls to slow the speed of planned investment. 

“Some technology programmes that were in progress will be finished; however, the timing of some larger projects has been deferred until our spending envelope increases.”

There had also been an ongoing focus on cost management and optimising its day-to-day operations.

“Non-critical spend and investment have been deferred, and the business is focused on prioritising the core aspects of the business, from operations, through our supply chain, and into market,” Boulton said. 

The co-op’s shares, listed on the Unlisted securities exchange (USX), last traded at $1.04, having fallen from $1.42 per share when it reported its results this time last year.

Alliance Group, also a meat processing co-operative, reported a loss of just over $70m in its financial year to September 30, 2023.