The contrast between Silver Fern Farms and Alliance Group at the Waimumu Field Days earlier this year was marked.
SFF looked smart with its new black and green branded tent. Alliance looked a bit tired under old, white canvas.
When I mentioned that to my farmer he said, “Don’t be fooled by appearances, look at their performance.”
He has been proved right.
In spite of very good PR and distinctive branding, the contents of SFF’s annual report aren’t very flash:
Silver Fern Farms has reported a net operating loss before tax for the 12 months ended 30 September 2010 of $800,000 (2009 profit $5.4m) from total revenue of $1,810m (2009 $2,014m).
In addition, one-off extraordinary restructuring costs of $7.2m were incurred. . .
The company moved its financial end of year to 30 September to be in line with industry convention. This year’s statutory accounts for the 13-month period shows $14.0m net loss (including non-recurring items) after tax, having accounted for two Septembers. September is a loss-making month in the industry’s business cycle, because of the low activity and high fixed cost nature of the business.
Total debt was reduced over the period by $67m to $117m as the company refinanced its banking arrangements, as well as repaying the $75m SFF030 Bond on 15 November 2010. This will save approximately $3m in ongoing interest annually.
Contrast that with Alliance’s annual report which showed an operating profit of of $29.6 million from a turnover of $1.4 billion for the year ending September 30. It will be distributing a pool of $12.6 million to shareholders and a 5% fully imputed dividend.
SFF has done well to reduce debt but still has only a 61.3 percent equity ratio while Alliance had an equity ratio of 81.5%.
Demand for lamb on overseas markets is high but bad weather throughout most of the country and a slow start to spring growth has led to a large drop in the supply of stock.
Farmers are already benefitting from what is a sellers’ market but it will be a tough year for meat companies.
If we judge them by their perofrmance rather than appearances, Alliance will be better able to cope with a tough season than SFF.