Sheep and beef farmers, particularly those in the south, will have a good reason to gasp when they read of the huge loss reported by Alliance Group today.
The Southland-based co-operative has reported a net loss after tax of $50.8 million from a turnover of $1.37 billion for the year ending 30 September 2012.
It stated in a media release that this was the result of restructuring costs of $13.5 million which arose from the cessation of sheep and lamb processing at its Mataura Plant.
In announcing the company’s first operating loss in 20 years, the Chairman of Alliance Group, Owen Poole, said: “While this is a very disappointing result, it reflects a substantial change in our export markets over the past 12 months, in particular for sheepmeat.
“Export market prices for lamb suffered a steep decline in key markets due to the widespread economic crisis. The increasing value of the New Zealand dollar through the period exacerbated the impact of the price decline.
“We accept that many exporters and processors like ourselves did not respond to the changing economic environment fast enough, and in an intensely competitive industry, continued to pay too much for livestock for too long.
“Despite the significant loss, and after providing for the restructuring costs associated with ending sheepmeat processing at our Mataura Plant and the closure of Sockburn Plant, the company’s balance sheet remains robust.
“These decisions, as well as investments in beef processing at Mataura, venison processing at Smithfield and rendering at Lorneville, will provide significant ongoing cost savings and benefits. Alliance Group anticipates a much improved financial result for the 2013 year.”
In an interesting move, the company has made changes to its procurement policies offering a part payment for a committment of supply.
Grant Cuff, Chief Executive of Alliance Group, said: “Despite the challenging economic environment, stability is now returning to the market and recent events give Alliance Group and its 5,000 shareholders cause for optimism.
“China continues to show strong growth, particularly with higher-value products being added to the offer, while the first shipment of Pure South lamb has now arrived in Brazil. Alliance Group believes Brazil offers significant potential, given its natural affinity for red meat, a growing population and an emerging middle class.
“The recent announcement of an exclusive deal to supply chilled New Zealand lamb to iconic UK retailer Marks & Spencer is also good news for suppliers.”