Under-utilised facilities drop 2015 profits for Blue Sky Meats

Under-utilised facilities are the main reason for a 36 percent fall in red meat processor and exporter Blue Sky Meat’s 2015 profits, according to the company’s latest results.

In a release at the Unlisted share trading platform the company’s directors announced an after tax profit of $1,239,630 for its year-ending 31 March 2015, compared with a 2014 profit of $1,946,504 – a 36 percent fall.

Chairman Graham Cooney noted that while the result was acceptable, it was not as good as the directors wanted.

“The reason for a lower profit is simply related to a lower than desirable throughput – the facilities are being under-utilised,” he said.

Revenue at $102.1 million was up 7.18 percent on the previous year.

The company’s annual report noted that the year has been ‘business-as-usual’ and relatively free on industry controversy in regards to the day-to-date management.

“It reflected a market for the company’s products that, firstly, led to a build up of stock in some markets and, secondly, a gradual increase in stocks as a direct result of the international situation. Generally prices paid to suppliers were supported by the market.”

The company’s most significant milestone in the year, the purchase of the former Clover Meats plant in Gore, occurred in December 2014. The 100 percent-owned subsidiary has since been renamed to Blue Sky Meats (Gore) Ltd. Further capital expenditure will be required to maximise beef throughput, the company says.

The investment was justified by continuous feedback from Blue Sky Meats’ sheep and bobby calf suppliers that they were unable to commit more animals due to the company’s inability to process all species, something other processing competitors had used as their argument with livestock procurement, noted Cooney.

Subsequently, a procurement, processing and marketing agreement between Blue Sky Meats and venison processor and exporter Duncan (NZ) Ltd was forged. This will enable Blue Sky Meats to provide venison processing to its suppliers and product to its sheepmeat markets, while Duncan NZ can provide sheep and beef processing to its deer suppliers and product to its markets.

“This is a small step in industry rationalisation. With its recent investment into beef, its deer partnership and an ability to change the sheep processing configuration at short notice alongside the long-standing livestock contracting system, Blue Sky Meats is uniquely placed to respond to a rapidly changing industry,” he said.

Cooney believes the industry challenges facing Blue Sky Meats have not changed from recent years.

“Under-utilised facilities are not unique to Blue Sky Meats – it applies to all sheepmeat processing companies. The fact remains that the industry is missing out on many dollars by continuing to under-utilise the facilities. While many of the industry’s woes can be blamed on companies, this issue can only be solved by farmers.”

Noting the recent major overseas investment in one of the larger meat companies in New Zealand, which has been approved by the Overseas Investment Office, Cooney says that future investments from offshore in New Zealand food producing companies will continue and will be driven by a determination to guarantee supply of product into markets.

“The investment interest is from a number of countries and shows no sign of abatement. Blue Sky Meats continues to get interest from a number of potential investors.”

The directors are recommending a dividend of five cents a share, requiring $576,305 and continuing the policy of maximising dividends at around 50 percent of after tax profit.

 

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