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Meat processor Silver Fern Farms has completed a restructuring programme and is pushing to restart merger talks with rival Alliance Group.
The Dunedin-based co-operative said yesterday that it planned to shut down sheep and lamb slaughter at its Canterbury processing plant near Christchurch, with a loss of 249 jobs.
Chief executive Keith Cooper said about 70 people could be redeployed in the company and no more closures were planned.
"These decisive actions, coupled to the proposed partnership with PGG Wrightson and commitment of additional capital of $220 million, should now address the concerns Alliance had with a merger last year and create the opportunity for Alliance to recommence merger discussions."
The company said savings from the restructuring programme totalled tens of million of dollars, while debt was down by $150 million since February, 2007 and borrowings for the year ending August 31 were expected to be $230 million, down from $330 million the previous year.
Alliance turned down an opportunity to merge with Silver Fern Farms last year, while a bigger industry mega-merger proposed by Alliance collapsed in April lacking agreement with Silver Fern Farms.
Silver Fern Farms has since announced plans to sell half of itself to listed rural services business PGG Wrightson for $220 million in a deal also promoted as a platform for rationalisation. Alliance chairman Owen Poole said the Southland-based co-operative processor was not attracted to the proposal and had significant reservations, including loss of farmer control, governance and the hybrid model.
A merger with Silver Fern Farms alone was not big enough and the synergies were not good enough, Poole said. To generate significant gains for farmers the merger needed to be more substantial, he said. "That opportunity's been lost," said Poole.
Anzco Foods chairman Graeme Harrison said: "Anzco is always prepared to listen but clearly credibility of the parties is very important." Silver Fern Farms posted a net loss of $40.3 million in the year ended August 31 and began restructuring to better align capacity to supply, improve financial performance and re-position the business under a new brand.
The company has cut six sites, lamb capacity by five chains and about 900 jobs, with some employees moved within the company.
Chief executive Keith Cooper said projections were broadly aligned with forecasts by Meat & Wool Economic Service for a reduction in livestock over at least the next three years.
"It [restructuring] reflects the overall decline in South Island sheep and lamb numbers, which are expected to drop by an estimated 2.2 million next year, as conversions in traditional sheep and lamb farming areas to dairy and [alternative] land uses translates into lower stock units," Cooper said.
Meat & Wool New Zealand chairman Mike Petersen said Silver Fern Farms should be congratulated for the restructuring.
"I suspect that given the numbers that we're seeing at the moment it may be that there's further industry rationalisation required but it really depends on how farmers feel about restocking farms over the next 12 to 24 months," Petersen said. It was too early to say whether Silver Fern Farms would get the 75 per cent shareholder support needed, with farmers on a knife-edge.
"We remain unrepentant in our view that rationalisation and major changes in the industry need to happen because if we don't we're going to be in the same place we've been in for the last 30 years."
PROFIT CLOUD FOR BLUE SKY MEATS
Invercargill-based Blue Sky Meats is reporting annual net profit of $282,000, only about a fifth of the previous year's level as widespread challenges confront the industry.
The result was achieved on operating revenue down 11 per cent to $79.35 million and compared with net profit of $1.53 million in the year to March last year.
Chairman Graham Cooney described the latest result as "very disappointing".
"It reflects a conscious decision to return a higher than normal amount of the company's income to farmer suppliers due to the intense competition faced by the industry in terms of land-use alternatives."
As well as the effect of new international reporting standards, the result was due to a poor first half with lower throughput in all stock classes and non-existent margins in lamb and sheep trading, Cooney said.
The second half year was better but was affected by extra costs associated with a higher kill aimed at meeting requests from regular suppliers for more killing space. That was combined with tight margins on lamb and sheep.
He said no dividend was being recommended, which was "not a good outcome".
- NZPA
