Silver Fern Farms chairman Rob Hewett says Silver Fern Farms is on track to deliver a significantly improved profit for the 2014 year following a strategic review of the business and a focus on debt reduction.
“We expect the audited pre-tax earnings for the company will be $5-7 million for the year just ended to 30 September 2014, which will represent a greater than $40 million net profit before tax improvement in performance on 2013. We know many of our farmer shareholders see our profitability as a priority for the company this season, which is what we have delivered,” Hewett says.
Over the same period the company has also paid down $100 million in debt as part of a plan to reduce the cost of debt servicing to the company.
Hewett also announced chief executive Keith Cooper was stepping down from the role.
“Keith has made a significant contribution to the business since joining the co-operative in 1989. In his eight years as chief executive he led the creation of the Silver Fern Farms brand coupled with the implementation of the value creation strategy which covers the consumer range, commercialisation of the Beef Eating Quality System and FarmIQ,” Hewett comments.
“The Board thanks Keith for his committed service over 24 years and his expertise in leading the company through some significant challenges.”
Cooper says after eight years in the role it was timely to step down with the company returning to profit and embarking on various new initiatives.
“The business has made good progress this financial year following two very challenging years, however there is still much work to do. I have thoroughly enjoyed leading the creation of a co-operative food company; however the timing is right for change, for someone with different skill sets and a high level of energy to take Silver Fern Farms through its next phase of development,” he says.
The Company has appointed Dean Hamilton (left), who joined as chief strategy officer in April 2014, as interim chief executive. He will transition into the role over the coming months.
Hewett says: “The Board is pleased that Dean has agreed to lead the company through this next phase. He brings with him extensive financial and operational senior leadership experience as well as a good understanding of the business.”
According to Hewett, organisational changes made this year contributed to the company’s improved performance.
“Our sales and procurement operations have both been reorganised and performed strongly.
“Carrying on from that work, we are planning on internally reorganising the business into three species units – beef, sheepmeat and venison. The new business structure will continue to be centrally led and will make the cooperative more responsive to future developments and opportunities in the current overall industry model. The improved structure will increase visibility of performance and strategy across species and establish a broader range of opportunities for any future capital structure initiatives.
“We believe the timing is right to look at capital structure options in view of our improved profitability, a positive backdrop of rising global demand for protein, an improved outlook for farm profitability and ongoing interest from customers to gain security of supply. The company will appoint an investment bank to assist it.”
Any new capital would allow the company to accelerate the reduction of bank debt and the associated impact of debt servicing which currently costs the business $35 million a year.
“With an improved capital position there is the potential we can enable industry rationalisation if the right opportunities arise.”
Hewett says: “The market outlook is positive which should give farmers good confidence going into the coming season.”
“We expect to see the $100 lamb mark achieved given current market signals. Beef should trade in the range of 450/550 cents per kg (cpk) and venison is expected to stabilise at recent levels of 680/800 cpk.”
A full audited result will be announced in November.
Supplied by Silver Fern Farms. The company is holding the first of a round of shareholder and supplier meetings in Waipukerau this morning. Other meetings are being held around the country over the next fortnight (Silver Fern Farms Supplier Roadshow Schedule Oct 2014). RSVPs are encouraged.