Blue Sky Meats yesterday announced a $3.87 million after-tax loss this year compared with a $3.68m profit two years ago.
This was a situation Blue Sky Meats chairman Graham Cooney hoped would never be repeated again in the New Zealand meat industry.
Mr Cooney said between December 2011 and December 2012 international market prices for almost all of the items the company sold reduced at an alarming rate.
Animals continued to be processed in the country and the products from the animals, while sitting in store, lost value at a fast rate.
The prices paid to farmers reduced during 2012 but the reduction was at a much slower rate than the market price reduction, he said.
The overall effect also increased the company's costs, including interest and storage, and currency movements in that period also added to the difficulties, he said.
However, a strong balance sheet helped the company through a disastrous year, he said.
The cash flow during the 2011-12 financial year was strong and past investment in the Chinese market paid dividends.
China was now the company's largest country of destination for both volume and value.
The past three months of the financial year recorded profitability similar to historical levels for that time of year, he said.
Mr Cooney accepted the industry model was broken but said he believed the solutions were in New Zealand, not in the marketplace. To maximise returns for all New Zealand stakeholders there needed to be a massive move away from a production-led industry to a market-led one, he said.
"The technology to do this is either available now or is rapidly being developed.
"But it will require significant changes in farm management and companies will have to build closer relationships with their suppliers to ensure the production of animals on time and on specification for market needs."
No dividend would be paid this year.
It was a disappointing outcome against a background of average after-tax dividends of 10 cents per share per annum.
But directors considered it to be prudent in the circumstances, Mr Cooney said.
- © Fairfax NZ News
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