Mega-meat firm has work to do

By LIAM DANN and NZPA

The benefits of the Richmond takeover of PPCS have yet to be felt throughout the new company, says PPCS Richmond chief executive Stewart Barnett.

PPCS Richmond - the country's largest meat company - reported a $38.1 million pre-tax profit last week. It had turnover of $2.2 billion.

The high dollar knocked the shine off the result for the newly merged mega-meat company, Barnett said.

He described the result as satisfactory given the currency situation but "not one to sit back on".

"We've got to strive to do better."

This result was basically just the PPCS result and the Richmond result added together, Barnett said.

The export synergies and operational cost savings from integration of parts of the business would not be realised until next year's result.

Barnett also raised concerns about compliance costs faced by the company. Red tape might ultimately force it to move some processing overseas.

He said increasing compliance costs and "changeable" environmental standards discouraged business and could force the Dunedin co-operative to look at shifting operations such as pelt processing overseas.

The processing of skins could be done cheaper and with fewer regulations overseas, with the cost savings returned to suppliers.

Barnett said there were no plans to move parts of the business yet and the company had to be environmentally sensitive, but he was pointing out the difficulties companies faced.

"We are stating it quite clearly, but many people are focused on enforcing their interpretation and different standards."

The end-of-year result to August 31 included 11 months of majority ownership of Hawkes Bay processor and marketer Richmond, and one month of total ownership.

Excluding Richmond, PPCS' end-of-year profit was $17 million, compared with $19.3 million.

Operating revenue including Richmond was $2.2 billion, compared with $1.4 billion last year, giving a before surplus of $38.1 million ($21.6 million in 2003).

The net after-tax group surplus was $27 million ($16.4 million).

Barnett said suppliers endured drought in the South Island, forcing many to send lambs north, and storms in the North Island.

A push to reduce costs at Richmond also paid dividends.

Eligible PPCS suppliers will share in $9.6 million of rebate and bonus shares.

Barnett said lamb remained a desired meat in Europe and venison was showing signs of recovering from extreme high then low prices.

Beef benefited from food scares and low production in Australia and the United States.

The value of the euro and US dollar had dropped against the New Zealand dollar by 15 per cent to 20 per cent compared with last season and Barnett said that would mitigate higher market prices being paid for lamb.