PPCS announces job cuts

DEAN KOZANIC/The Press

MAKING CUTS: the beef chain at PPCS's Belfast plant. PPCS has announced plans to cut 60 jobs closing venison and lambskin processing operations.

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South Island-based meat giant PPCS plans to cut 60 jobs closing venison and lambskin processing operations, to improve its troubled business.

Last month New Zealand's biggest meat processor posted a $40 million pre-tax loss, blaming the tough year on the high kiwi dollar and lower export lamb prices.

The Dunedin farmer-owned co-operative has also breached terms of its banking facilities but received waivers from its banks. It had breached its interest coverage ratios regarding interest payments on bonds issued to investors.

Chief executive Keith Cooper said PPCS was proposing to close its Te Kauwhata venison processing facility and its Balclutha Windward base, which manufactured finished lambskin products.

If the closures were confirmed, PPCS would offer positions to 25 Windward staff at its nearby Finegand works close to Balclutha, and to 35 Te Kauwhata staff at other plants as opportunities arose.

"The proposed changes are part of the company's strategic change process announced last week which seeks to deliver an improved business model and return PPCS to its traditional profitability over the next two years," Cooper said.

"These proposed closures are the first phase of the company's right-sizing programme to align the company's processing capacity to the current livestock profile and to exit non-core businesses."

PPCS communications manager Gary Johnson said PPCS was seeking to strengthen its vertically integrated business model during a sustained period of strong currency conditions.

A consultation process with employees and their representatives began yesterday at the two plants, with implementation decisions expected within the next fortnight, he said.

The plan to close the Waikato-based Te Kauwhata venison processing facility, which employed 35 staff, was based on a trend of declining deer numbers and increasing North Island venison processing capacity.

"According to Deer Industry New Zealand, the number of deer available for venison processing is expected to drop by 35% in the next four years from 736,000 in 2006 to 479,000 by 2009 ... Processing facilities such as Te Kauwhata are not viable where (farmer-suppliers) elect not to support the assets they own or to support the ongoing marketing initiatives in which PPCS and those suppliers had previously invested."

Cooper said PPCS Windward was no longer economic in the face of intense competition from low-cost countries and a drop in revenues of finished woolly lambskin products worldwide.

Overseas competition has seen consolidation and closure of several New Zealand-based wool tanneries in recent years, he said.

Japanese-owned exporter G. L. Bowron has laid off hundreds of staff at its Christchurch tannery in recent years.

New Zealand lambskins were being finished in countries with low labour costs, particularly China and Thailand, Cooper said.

Regardless of the future of Windward, PPCS would continue to export lamb pelts and woolly skins for which offshore demand remained, he said.

The Windward operation consisted of a tannery co-located at PPCS Finegand processing facility employing 11 staff and a finishing factory in Balclutha employing 14 staff.

PPCS planned to cease production at the Windward tannery next month. Production at the finishing factory would continue until remaining orders were completed early in 2008.

There were plans to sell the Windward sales arm as a going concern.

- © Fairfax NZ News