Barber’s Wire: ANZCO’s profit disclosed in Itoham’s statement

Allan BarberJapanese food company Itoham Foods announced last week an increase in its shareholding in New Zealand meat processor and exporter ANZCO Foods from 48.28 percent to 65 percent. As a result of the transaction, it will be able to consolidate ANZCO’s revenues and earnings into its annual accounts, writes Allan Barber.

$40 million worth of shares are being bought from three entities: another leading Japanese food manufacturer Nippon Suisan Kaisha, chairman Graeme Harrison and JANZ Investments, owned by Graeme Harrison and ANZCO staff members. The sale will see the minority shareholders reducing their shareholdings on a pro-rata basis with Harrison’s effective holding falling from approximately 20 percent to 14 percent.

A side effect of the announcement to the Tokyo Stock Exchange was the disclosure of ANZCO’s annual result for the 2014 year which would not normally be announced to the Companies Office until late March. This demonstrates a small drop of $25.6 million (1.92%) in sales, but a two-thirds reduction in operating income and a $6.2 million or 50.8 percent fall in net profit. This fell from $12.22 million to just over $6 million.

The figures do not give any details of the reasons for the profit reduction, although a 9.4 percent increase in total assets suggest an increase in inventories may be a factor. The profit represents a 0.48 percent return on sales and 2.7 percent on net assets which is less than ideal, albeit a continuation of ANZCO’s track record of posting a profit, apart from 2012 when the whole meat industry lost money.

The main question is why Itoham has decided to increase its ownership percentage in a New Zealand meat exporter now when it has been content to remain a fairly passive shareholder since 1995 when Harrison put together a consortium of investors to buy ANZCO from the Meat Board and Huttons Kiwi.

The answer appears to be a combination of factors, notably Harrison’s stated intention to retire at an appropriate time presumably in the relatively near term. In 2009, Mitsubishi Corporation became Itoham’s largest shareholder which can now access 28,000 staff in Mitsubishi’s Living Essentials Group involved in all stages of the distribution chain throughout the world with a focus on emerging markets.

Itoham’s announcement to the Tokyo Stock Exchange signals its intention to grow its business outside Japan by becoming “the most trusted manufacturer of processed meat in Asia”. Itoham’s investment with ANZCO is seen as an integral step to achieving this goal. ANZCO is seen as an ideal platform for expanding red meat sales to the world’s growth markets which contrasts with Itoham’s previous focus on the Japanese domestic market for sausage and processed meats.

Correspondingly, the main business focus of Nissui which also bought its shares in 1995 is on marine products including a 50 percent shareholding in Sealord, processed foods and chemicals. Therefore, its holding in ANZCO is less aligned with its core businesses.

At this point, there will be no change to ANZCO’s board of directors or management with Graeme Harrison and Mark Clarkson remaining as chairman and managing director respectively. In time it seems inevitable that consolidation of ownership and retirements will result in further changes.

Allan Barber is a meat industry commentator. He has his own blog Barber’s Meaty Issues and can be contacted by emailing him at

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