November 14, 2007

 

New Zealand's Alliance Meat remains optimistic despite lower profits

 

 

New Zealand meat processor Alliance Group remains hopeful that the rest of 2007 will be good despite low profit results.

 

Net profit after a $7.8 million distribution was $3.2 million for the year ending September 30, compared to $20.3 million the previous year.

 

Unlike rival PPCS, Alliance has no plans to cut capacity and close plants.

 

Alliance chairman John Turner said it would have been unreasonable to ask shareholders of the Southland- based company to be the vehicle for rationalisation in the meat industry.

 

As the company rationalised in 1992, Turner said there are more plants aligned to its capacity than any other firm in New Zealand.

 

Higher market prices provided a more positive outlook for the new season.

 

Chief executive Grant Cuff said the company had spoken to farmers in July and August predicting lambs would be worth about $60, compared to $50 at peak processing last season, at estimated exchange rates including US70c.

 

The company had held lamb prices higher than had been justified by market returns during the peak of last season.

 

Exchange rates had a big effect on prices paid to farmers, while a reduced availability of lambs in the second half of the year improved returns as well as a brief fall in the value of the dollar towards the end of the season helped profitability.

 

The financial result reinforced the success of strategies including determining customer needs, signalling those needs to suppliers, reinvesting for productivity, aligning capacity and rewarding farmers for quality and suitability, Cuff said.

 

The outlook in the medium term for sheep meat was good with favourable supply fundamentals and increasing protein prices internationally.

 

Alliance would introduce a yield quality contract for loyal lamb suppliers for the new season. Farmers that committed supply for the year would get a yield payment of up to $3.50 per qualifying lamb above the weekly schedule price at the time of slaughter, which would be in addition to the end of year distribution.