Alliance Group reports its business strategy is paying dividends with a $9.8 million distribution to farmer shareholders on the back of an improved financial result.
The cooperative has reported a pre-tax profit of $10.1 million for the year ending 30 September 2016, compared to a $7.9 million pre-tax profit last year – nearly 28 percent more than last year . The result is based on a turnover of $1.36 billion.
Murray Taggart, chair of Alliance Group, says the past year has been challenging for farmers with difficult market conditions, but the cooperative had strengthened its balance sheet considerably.
“Global market prices have been at their most difficult in the last five years and any recovery in prices since May has been more than offset by the foreign exchange levels, in particular, British Sterling and US Dollar.
“However, the weather conditions across the country have also became more favourable as the year progressed, which has provided a significant boost for our farmers.”
The cooperative’s business transformation strategy was resulting in tangible benefits that had exceeded expectations, delivering gains of $56 million compared to the budgeted $34 million, says Taggart.
“Our debt has reduced from $129 million to $41 million and we have no seasonal debt. We’re also working hard to gain a far deeper market penetration and to capture more value out of existing markets.
“Although we’re still in the early stages of a transformation, our strengthened balance sheet and a fitter business means we’re on track to take advantage of global opportunities as we continue to build a stronger, more resilient cooperative, for the benefit of our farmer shareholders.
David Surveyor, Alliance chief executive, says the cooperative’s focus over the past year was on ensuring the business strategy gained traction.
“Our strategy is based around creating value from sales and marketing activities and lowering the cost base to deliver value for farmer shareholders.
“The weakening of market prices and global volatility over the year reduced group revenues but the value created from our strategy projects meant the co-operative was able to act as a buffer and absorb some of the impact on our farmer shareholders. We would have liked to have absorbed more and remain committed to finding ways to pay farmers more for their livestock.
“It’s important because as New Zealand’s only 100 percent farmer-owned major red meat cooperative, farmers are at the heart of every decision we make. Every cent Alliance Group makes goes back to the farmer or is invested for the benefit of the farmer-owned business.”
Alliance Group will continue to invest in improving its operational performance, says Surveyor.
“This is already being achieved in a variety of areas including lowering our operating costs and improving productivity, automated measurement and cutting of the carcase, maximising yield, building our brands and matching products to optimal market opportunity.
“Investment in robotics within production and systemised planning solutions enabling efficient production runs are vital to making gains in processing. We will also be deploying further processing and packaging technologies that deliver efficiencies, lower running costs and enhance revenue opportunities.”
The company has also significantly improved its overall safety performance, which was a crucial part of the cooperative’s strategy, he said.
“The 43 percent reduction in our Total Recordable Injury Frequency Rate (TRIFR) means fewer people getting hurt in our workplaces, which is good for our people and our business.”
The company’s balance sheet remains strong with shareholders’ funds of $302.5 million (2015 $308.9 million) providing an equity ratio of 71 percent.
“Our loyal committed farmer-shareholders and our 5,000 employees deserve a lot of credit for the improved financial performance,” says Surveyor.
“As a cooperative, we owe it to our farmer shareholders to make greater strides to ensure we’re an attractive option for farmers and a place where people want to work.
“We still have a long way to go and our focus over the next 12 months will be diligently working on creating a better result for New Zealand’s best farmers,” Surveyor says.