Weak margins butcher Affco

By ELLEN READ

Meat processor Affco blames its huge interim loss on adverse trading conditions and significant restructuring costs.

The firm yesterday reported a $14.7 million net loss for the six months to the end of March, down sharply from a $700,000 net profit for the previous first half. No dividend will be paid.

Executive chairman Sam Lewis said intense domestic competition for livestock and a wet summer meant margins had to be reduced to attract enough livestock.

Revenue for the six months was $494 million compared with a previous $558 million.

Lewis said costs had decreased from the previous first half.

In March, Lewis warned the company's annual meeting that competition for stock was intense, resulting in higher prices for farmers and lower margins for meat companies.

Yesterday, Lewis said the company's restructuring was on track and should improve Affco's ability to operate in a volatile and competitive environment.

An ongoing strategic review highlighted Affco's unacceptably high level of fixed costs, particularly in head office, administration and at plants but significant progress had been made in the past few months to reduce fixed costs and improve plant efficiencies, Lewis said.

He was confident the foundations had been laid for an improved future outlook but warned it would not be without its difficulties.

Lewis would not speculate on an end of year figure but said a rising New Zealand dollar was not helping the situation.