Silver Fern Farms upbeat despite loss

POSITIVE OUTLOOK: Despite posting a half-year loss, Silver Fern Farms is optimistic about turning a profit by the end of the year.

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Silver Fern Farms has made a half-year loss of $14.3 million before tax from revenue affected by fewer lambs to kill and a high dollar, but believes it will make a profit by the year's end.

Revenue for New Zealand's largest meat processor fell to $784.3m in its interim result for the six months ending February, $217m less than last year's first half.

However, the first half of the year is usually the worst trading performer as was the case in the 2008/09 season when SFF rebounded from a $16.5m loss to post a second-half $21m profit for a better year-long result.

After this season's poor start its meat plants were running at full capacity in March and April and the co-operative has already recouped the losses of the first six months and is now in a profit position.

Trading was complicated initially by farmers holding on to livestock from a good growing season in combination with low seasonal flows to stunt meat processing, with SFF having to wear the cost of plants performing under capacity.

The co-operative has taken some comfort from retaining its market share as the meat industry adjusts to the national kill dropping by 1.5m lambs.

Large inroads have also been made into its debt levels, reduced by $102.8m, to improve its equity-to-debt ratio from 29 per cent to 43 per cent.

SFF chief executive Keith Cooper said the result was acceptable considering the lower stock throughput, the international trading climate and against the loss recorded for the first half of last season.

He said the co-operative was heading towards a profitable position by the end of the financial year with the second half often performing better than the first.

"There is still a lot of water to go under the bridge and it depends on margins and market and procurement prices until the end of September." The half-year result was "not miles away" from the co-operative's target, which was not publicised, he said.

Mr Cooper said livestock volumes had come later than usual and SFF would be carrying that cost, and the higher dollar had lowered values.

However, that had also reduced working costs, he said.

SFF is confident the equity-to-debt ratio will be between 50 per cent and 60 per cent by the year's close.

The strong dollar has hurt and against a weaker euro and pound equals a lamb making $18 less than a year ago and the value of a steer reducing by $200.

SFF has changed its financial year to close at the end of September instead of August 31, to align with the farming seasons, and this year will have a transitional 13 months.

September is usually a loss-making month and that is expected to have an impact on the final result.

- © Fairfax NZ News