There are no surprises in today’s announcement that PPCS is closing its Burnside venison plant in Dunedin with the loss of 138 jobs.
The age of the plant was one of the factors counting against it and PP chief executive Keith Cooper said it had been losing millions of dollars.
“Tightening New Zealand and European food safety regulations make the continued operation of export meat processing facilities at Burnside increasingly problematic as all areas on site, even those not used for food processing, must be maintained to specified standards,” Mr Cooper said.
“In addition, the modern blast freezers used for venison processing require a large section of now-obsolete conventional cold storage to be frozen down, which incurs significant ongoing electricity costs.”
Mr Cooper said sheep and lamb numbers were expected to drop by two million in the South Island next year and national deer numbers were forecast to drop from 736,000 to around 500,000.
“The forecast seriously impacts on the ongoing viability of the venison and (lamb and deer) skin processing operations at Burnside,” he said.
It’s been a horror month for employment in Dunedin with 430 jobs lost through Fisher and Paykal’s closure of its Mosgiel plant and a further 50 jobs lost with the closure of Tamahine knitwear.
The announcement will also be making staff at other freezing works nervous. PP announced the closure of its Orinigi works with the loss of 446 jobs last week and there may be more to come.
Owen Hembry points out that PP with 24 plants, including Orinigi, has as many plants as Alliance with 8, Affco (10) and ANZCo Foods (7) combined.
In fact Alliance and Affco, which has previously restructured, have both said they have no plans to rationalise.
So the pain is going to fall mainly on PPCS but as the saying goes, no pain no gain – and what comes out the other end will undoubtedly be a leaner, fitter company.
The cost of redundancies at Oringi – which employs 466 people with an opportunity for about 100 to be relocated within the company – will be about $14 million to $15 million with operating cost savings of about $15 million a year.
A fitter PPCS will have another card to play – a good geographic and product spread.
One of the reasons Alliance didn’t want to merge with PP was the overcapacity of PP works. These closures will change that, but PP may also feel that having bitten the bullet it is in the best interests of the company to continue on its own.