Profit now but drought's ravages are on the way

By LIAM DANN primary industries editor

The drought parching the lower North Island hit corporate bottom lines yesterday, lifting profits for one company and prompting a warning from another.

Meat company Richmond announced a profit boosted by an earlier than usual killing season.

Rural services company Allied Farmers warned the drought was likely to drive its annual profit down by about 40 per cent compared with last year's record return of $3.4 million.

Richmond reported a return to profitability with a $14.2 million result for the six months to March 31.

It recorded a $1.5 million loss for the same period a year ago.

Chairman Sam Robinson said a big part of the turnaround was through higher than usual stock flows.

Farmers in drought-stricken regions such as Manawatu and Taranaki have been sending stock to slaughter earlier than usual because of the drought.

"During February many plants achieved all- time production throughput records," Robinson said.

He also cited an overall improvement in operating performance as a cause for the good result.

Allied Farmers chairman Brian Train said the effect of the drought on the west coast of the North Island had been exacerbated by the preceding cold spring.

Livestock values for sheep and beef had fallen by 20 and 30 per cent respectively over the past 12 months, he said.

It was not yet time to panic, Train said.

"Last year conditions were reversed," he said. "We had a dollar in the low 40s, one of the best summers on record and a $5.30 payout from Fonterra."

He was optimistic that forecasts for a mild winter would help.

"The situation in Manawatu is still pretty dire," he said. "I don't think it can get much worse."

It was inevitable that meat companies would benefit in the short term, he said.

"The meat processors have been going flat out."

Allied's share price fell 7c yesterday to close at $1.95.

Richmond, the target of a takeover bid by rival meat company PPCS, remained steady at $3.14 - 3c above the PPCS offer, which is due to close today.