Pictured at the Te Aroha opening are (left to right): local MP Scott Simpson; John Key; Eoin Garden chairman Silver Fern Farms; Keith Cooper, chief executive Silver Fern Farms; Kevin Winders, chief operating officer Silver Fern Farms.
Pictured at the Te Aroha opening are (left to right): local MP Scott Simpson; John Key; Eoin Garden chairman Silver Fern Farms; Keith Cooper, chief executive Silver Fern Farms; Kevin Winders, chief operating officer Silver Fern Farms.
Prime Minister the Rt Hon John Key opened Silver Fern Farms’ brand new flagship processing plant at Te Aroha this afternoon.
The new plant, the first to be built by the farmer co-operative under its current name Silver Fern Farms, replaces the beef processing plant seriously damaged by fire on the site in December 2010.
The ceremony was attended by representatives of central and local government, local iwi, and members of the Te Aroha community in addition to Silver Fern Farms’ board of directors, leadership team, plant management and contractors involved in the project.
Silver Fern Farms’ chairman, Eoin Garden, and chief executive, Keith Cooper, welcomed a large gathering of all those associated with the rebuild including contractors, local government representatives, local iwi and members of the Te Aroha community.
At the opening, Garden said the investment of $67m to commission the state-of-the-art facility was testament to the co-operative’s strong confidence in the sector and he indicated the clear alignment of this investment with the Government’s business growth agenda.
Keith Cooper spoke of the importance this plant has, not only to farmer-suppliers in the surrounding rural areas, but also to the local Te Aroha community. The fact the plant will be fully operational ahead of the new season is welcome news for the township, with the prospect it will employ up to 380 staff when operating at full capacity.
“The whole community has been behind the project every step of the way” said Te Aroha plant manager, Lance Warmington. “The company’s commitment to rebuilding Te Aroha is a big deal here – it means future security for hundreds of families in the area.”
Positive spin-offs for local community
Throughout the rebuilding process, Silver Fern Farms endeavoured to provide alternative options for staff whose livelihoods were affected by the fire, to the extent of making positions available at neighbouring plants and providing accommodation supplements in the early stages. In tough times, the company’s significant capital spend also has provided positive spin-offs to the local economy as a result of the number of contractors throughout the region engaged during the course of construction.
“Our whole team are extremely proud of the facility we’ve designed and created,” Warmington added.
“The company culture and the Silver Fern Farms brand and all it stands for are really embedded in the overall look and feel of the new plant, and our people are responding really positively to the new working environment.”
Eco-efficiency and sustainability “top of mind”
Developed in consultation with internationally recognised experts in process layout and ergonomics, the plant incorporates the latest meat processing technologies, including sophisticated traceability and yield collection systems. Cooper said the new design reflects the company’s focus on plant economics and best practice processing, and that eco-efficiency and sustainability were top of mind considerations.
“The rebuild gave us the opportunity to review the environmental footprint of our operation. Our focus is improving environmental efficiency while reducing costs through better use of resources and reduction of waste.” he said . “As a result, the plant sets a new industry benchmark in line with global customer requirements – it uses significantly less electricity and water per head and discharges less effluent per head processed.”
In his address, Cooper also thanked the co-operative’s loyal farmer-suppliers in the area for supporting the company through the re-build.
“We are grateful to those suppliers who have stood by us and persevered while we got the new plant up and running – we know the disruption has been an inconvenience for many. But we are enthusiastic about the service levels and advantages we can now offer them as a result of our investment.”
Silver Fern Farms intends to open the plant to farmer-suppliers and the local community in a series of open days in February 2013.
New Zealand meat companies’ high debt levels, must be of concern to the banks, says meat industry commentator Allan Barber.
Silver Fern Farms (SFF) is operating on a three month extension to its bank facility which expired at the end of September, but reported current (expiring within 12 months) loans of $316.7 million at the end of its 2012 financial year, Barber writes.
In its last published annual accounts to September 2011, ANZCO had current and non-current loans of $220 million which must surely have increased in the very challenging 2012 year. Lastly at the end of September Alliance had $331.8 million of assets and non-current loans of $196.1 million which are clearly not causing any immediate concern.
The two big co-operatives published their annual reports last week and neither makes pretty reading. Both results benefited from a large tax loss which, to be effective, must of course be offset eventually by profits.
Alliance’s financial position was fully flagged in its announcement of a $50.8 million post tax loss including the $19.4 million write down of its Mataura sheep processing unit, which was actually a pre-tax loss of $70.6 million before tax credits. Its balance sheet with 51 percent equity ratio is still strong, although not nearly as strong as twenty four or even twelve months earlier.
SFF had already announced an after-tax loss of $32.2 million which was also, in reality, a loss of $44.2 million pre-tax, which included no restructuring costs. Debt rose during the year from $111 million to $316 million, a massive increase which was largely accounted for by the inclusion of $35 million insurance payout for Te Aroha in the 2011 accounts, the cost of the rebuild, $83 million of higher livestock and finished product inventory, and the funding of the annual loss.
A careful study of the annual reports sheds an interesting light on the company’s banking arrangements. Its 2010 report stated that its facilities had been renewed for two years till September 2012 and included $75 million for repayment of its SFF030 bonds. The 2012 report notes that its facilities expire in September 2012, hence the classification of all secured loans as a current liability, as was the case in the 2011 accounts.
I understand from chief financial officer Keith Winders that SFF has been operating on a temporary extension to its banking facilities since the end of September; he claimed this was quite normal because of the annual renewal arrangement with its bankers. However it appears unusual to me, because firstly SFF previously had a two year facility and secondly it can’t be ideal to carry $300 million of bank loans into the new financial year without negotiating secured banking arrangements. However, the directors must have received solid assurances of the company’s continued trading ability to allow it to continue to operate and incur liabilities.
Winders was also quite definite that there would be no significantly different terms and conditions attached to the new facility when finalised. This suggests the operating environment since September must be at least stable, although there is little evidence of an improvement in market demand, especially for sheepmeat which caused all the problems last season.
The only major improvement I can see is the reduction in lamb prices which have fallen from $140 to $90 in a year for a 17.5 kg lamb, but the season hasn’t yet got sufficiently into its stride for trading performance to have recovered many of last year’s losses.
What is absolutely crystal clear is that the banks will be watching their exposure to the industry like hawks and will demand some dramatic improvements for the rest of this season for which the critical period will be from January to May. Last season’s problem was that the price was much too high to start with and none of the processors was brave enough to lead the way to get it down when stock numbers were low.
I imagine none of the meat companies will have any appetite for chasing market share at the expense of margin this year and, if they do, their banks will be down on them like a ton of bricks. Farmers had a bonus last season, but there’s no point in hoping for a repeat any time soon. This presupposes that processing capacity is fairly well aligned with livestock volumes because the last thing the industry can afford is a procurement led price war.
Unfortunately my impression is that there is still excess capacity in the country, even after the closure of Mataura, but for the time being the companies will all be determined to rebuild their balance sheets. Past experience suggests industry peace will only last as long as necessary to repair the damage before the companies find the prospect of grabbing market share too hard to resist.
The only long-term remedy will be rationalisation of processing capacity and ownership, combined with seasonal supply commitment like the dairy industry. The banks are one of two critical factors in a change of this nature, but they would have to work together and accept write-offs in the interest of a lasting solution.
Farmers are the other critical factor, but the process of converting them to seasonally committed suppliers is a slow one and nothing will make this happen overnight.
The meat industry appears likely to be consigned to a further period of instability, but this season may give some indication of whether it is heading in the right direction.
This item has appeared at interest.co.nz and also at Allan’s own blog Barber’s Meaty Issues.
Congratulations to Tony Egan’s team at Greenlea Premier Meats which, the Waikato Times informs us, recently won the Supreme Award in the 2012 Westpac Waikato Business Excellence Awards, after securing the Tompkins Wake Lawyers Award for Businesses that employ 50 or more full-time equivalent staff. Read more …
A new $87 million innovation programme that will look at how more value can be generated from beef carcases has been approved for Government funding.
Ministry for Primary Industries director-general Wayne McNee today announced approved co-funding from the Primary Growth Partnership (PGP) for the new Foodplus programme.
The PGP Fund is committing $43.5 million over seven years for the programme, which is worth $87 million in total and is being run by ANZCO Foods.
Foodplus will identify opportunities to create new products, with a particular focus on parts of the beef carcase that currently generate less value. ANZCO has identified three markets for innovative new products: food, ingredients and healthcare.
ANZCO Foods is a multinational group of companies and one of New Zealand’s largest exporters, with sales of $1.3 billion and employing more than 3,000 staff worldwide. ANZCO Foods also owns processing plants and a cattle feedlot: CMP, Riverlands and Five Star Beef.
“Adding further value to the carcase is essential for the future success of the meat industry,” says McNee. “ANZCO’s vision for Foodplus is relevant and bold and now backed by a significant investment.”
Rennie Davidson, CEO of ANZCO’s Food & Solutions division says ANZCO welcomes the opportunity to partner with the Crown on the Foodplus programme. “It is a large-scale project that wouldn’t be achievable without collaboration. We’re excited about the potential that this will bring to the sector.”
This announcement brings the Government’s investment in meat industry PGP programmes to $129.5 million, for projects worth a total of over half a billion dollars.
Minister welcomes announcement
Primary Industries Minister David Carter has welcomed the announcement of another successful PGP bid which lifts the total invested in the variety of projects to more than $650 million.
“ANZCO’s proposal to generate more value from the beef carcase with its Foodplus programme is bold and innovative. This is exactly what PGP is about – transforming great ideas into tangible R&D programmes focussed on results,” says Carter.
“Today’s announcement lifts the total government-industry investment in PGP since its inception three years ago to $665 million. This is firm proof of the Government’s drive to lift economic growth through primary sector innovation.
“Thanks to the collaborative government-industry approach, we have relevant projects underway across a range of sectors from dairy, arable, red meat and wool to forestry, seafood and aquaculture and manuka honey.
“New Zealand stands to gain from innovative investment in its primary industries because our food, fibre, fishing and forestry sectors are at the heart of our economy,” says the Minister.
ANZCO Foods is a multinational group of companies and one of New Zealand’s largest exporters, with sales of $1.3 billion and employing more than 3000 staff worldwide. The company owns processing plants and a cattle feedlot within a group including CMP, Riverlands and Five Star Beef.
Congratulations to Beef + Lamb NZ Ltd, which has just scooped the prize for best private sector website at this year’s WriteMark New Zealand Plain English Awards.
The judges were impressed with B+LNZ Ltd’s strong commitment to plain English. “The purpose is really clear and the pages show plain language, active verbs, and short sentences. Useful summaries and clear navigation help site visitors quickly find what they need.”
Chief executive Scott Champion says farmers are the “ultimate straight talkers” so the organisation wanted to make sure the newly revamped website did the same.
“We worked hard to get our website to where it is now, so we’re absolutely thrilled to win this award. We reckon we can do even better still, but it’s splendid to know we’re off to a good start.”
You can check out the award-winning website at www.beeflambnz.com.
A year after meat industry commentator Allan Barber started to try to uncover the true state of the Meat Workers Union (MWU)’s finances, the consolidated accounts have been posted on the Incorporated Societies website.
In an item that has appeared in NZ Farmers’ Weekly this week and at his own blog, Allan says that in contrast to the original set of accounts which showed the national office as having net assets of less than $1 million, the true picture incorporating all the branches shows net assets of $5 million.
In his analysis, Barber says “there doesn’t appear to be anything suspicious in the corrected accounts” and that they provide an accurate figure of annual membership fees, expenses incurred on behalf of the membership and the assets owned by the MWU. Fixed assets of $1.051 million include a $481 million loan to the Canterbury Meat Workers Welfare Society, which has been used to buy holiday cottages which are available for the benefit of all of the union’s members, according to the annual accounts.
Two items of particular interest for Barber are the substantial amount of money in the bank, reported as well in excess of $4 million, and the fact the Union as a whole has run at a loss for at least the last two financial years.
Barber notes that annual subscriptions, almost certainly falling in line with lower livestock numbers and efficiency improvements, are not quite enough to cover the level of expenses but appear to be under control.
“So other than the cost and inconvenience of being required to present consolidated accounts for all branches and head office, this all seems as though it will be a fairly painless exercise in future,” says Barber.
State-owned farm, Landcorp, has had a solid performance this year according to its latest accounts, says meat industry commentator Allan Barber.
Landcorp’s net operating profit of $27 million for 2011/12 was down on the previous year, but still a good performance, Barber says in a recent blog, adding that the SOE will pay a $20 million dividend to the Government.
During the year, it produced 10,176 tonnes of sheepmeat, 9,715 tonnes of beef and 2,258 tonnes of venison, as well as large volumes of milk solids, wool and timber.
Landcorp has a target of selling 80 percent of its lambs on fixed price contracts to Silver Fern Farms, Alliance and other meat companies and last year achieved in excess of 70 percent by this method, proving to its satisfaction that this provides less volatile and overall better market returns than spot trading. Lamb production is geared to meet specific weights and specification to fulfill meat companies’ contracts with northern hemisphere retailers.
As a founder partner with Silver Fern Farms and the Ministry for Primary Industries in FarmIQ Systems, Landcorp is committed to the development of integrated value chains from pasture to plate, designed to align New Zealand production and supply with consumer demand preferences. Twelve of Landcorp’s farms are now on FarmIQ’s farm management system.
The development which attracted the most publicity was the joint venture with Shanghai Pengxin to manage the 16 Crafar dairy farmers bought from the receivers and expected to get underway shortly. This fits in with Landcorp’s goal to increase its involvement in the dairy industry and a further “extension to Maronan Dairies in mid-Canterbury and further development Wairakei Estates near Taupo will contribute to this,” Barber believes.
Sheep and beef finishing has been boosted by the development of Cheltenham Downs in Manawatu and this has helped recovery from the drought years of 2007 and 2008, reports Barber.
Over the past 22 years, Landcorp has paid dividends to the government; therefore, New Zealand as a while, of nearly half a billion dollars.
“There’s no evidence that Landcorp is constrained by public ownership or that it would benefit from part privatisation,” concludes Barber.
Read the full blog item here at Barber’s Meaty Issues …
This item has also appeared at www.interest.co.nz.
The value of New Zealand’s exported goods fell $423 million (11 percent) to $3.5 billion in October 2012, compared with October 2011, says Statistics New Zealand.
“Almost half of the fall in export values was due to the falling value of dairy,” industry and labour statistics manager Louise Holmes-Oliver says. “This was despite an increase in dairy quantities.”
The value of imports rose $70 million (1.7 percent). Contributors to this rise were capital goods, up $94 million, and consumption goods, up $64 million, while intermediate goods fell $83 million.
The trade balance for October 2012 was a deficit of $718 million (21 percent of exports). This compares with a deficit of $226 million (5.8 percent of exports) in October 2011.
Seasonally adjusted exports fell 14 percent compared with September 2012. There was a large fall in milk powder, butter, and cheese exports, following two large decreases in August and September. Seasonally adjusted imports fell 8.0 percent in October 2012.
The seasonally adjusted meat and edible offal commodity grouping fell by eight percent ($39 million), with quantities down 12 percent. This follows increases in both values and quantities in September 2012. Trends show that the group has been rising since its most recent low point of March 2011 and is one percent lower than its high of July 2011.
The trend for exports remains at a high level, but is 6.3 percent lower than its peak of November 2011. The trend for imports has shown little change in recent months, and is now 7.0 percent lower than its record high of September 2008.
‘Omnishambles’, is the word of the year, according to the Oxford Dictionary. Coined originally in a British TV political sitcom, and meaning ‘a situation that is shambolic from every angle’, at first sight it seems a good way to describe this week’s public showing for the sheepmeat industry. It also seems fitting as ‘shambles’ was the old Middle English word for the place where meat is butchered and sold.
High prices for lamb last year, caused in part by high schedule prices to farmers compounded by the ridiculously high NZ dollar and customer resistance to the resulting final prices, resulting in high stock levels have combined to produce announcements of combined losses of over $81.9 million by Alliance Group and Silver Fern Farms this week to add to the $605,000 loss announced in July by the ‘canary-in-the-mine’ Blue Sky Meats.
The situation was signalled earlier in the year, with price resistance being evident, but it wasn’t apparent, until the end of year accounts wash-up, just how bad the situation was. The fall-out continues. According to media reports, Alliance Group has also confirmed this week that it will make redundancy payments for up to 223 staff as a result of the closure of the Mataura sheepmeat processing plant, which it announced earlier this year. In addition, lamb schedule prices to farmers are said to be tumbling as processors react to the reluctance of European customers to pay the higher prices. Both Alliance and Silver Fern Farms have acknowledged they paid too much for livestock for too long.
The vultures gathered as the Meat Workers Union received plenty of coverage this week with its claims of ‘industry over-capacity’ and lack of leadership in the meat industry – sounding, perhaps, a little last century, but calling for government intervention. Hindsight is a wonderful thing.
Strong, but silent. Like a good southern bloke, the industry is taking its medicine. No industry comment has been made to date by any of the industry organisations or by Government. A response is probably brewing.
We know the meat export industry is resilient. It’s been around for 130 years after all. It’s also characterised by businesses: small-to-medium farming businesses supplying to mainly medium and large meat processing businesses producing product for, in some cases and from New Zealand’s perspective, gigantic global commercial concerns. All of which are subject to the current, and extraordinary, global economic pressures.
Contrary to MWU assertions, plenty is happening behind the scenes as a result of the 2010 Red Meat Sector Strategy, this year’s Riddet Institute’s ‘Call to Arms’, the Stanford University boot camp and no doubt also yesterday’s Pure Advantage Green Growth report will have sparked ideas. All of these work alongside and complement the Government’s Business Growth Agenda. All highlight the importance of the primary sector to New Zealand’s future fortunes.
Stockpiles have already been worked through, new plants are being built, like Silver Fern Farms’ Te Aroha replacement plant for the one that burned down, and old ones adjusted to cater for the shifts in geographic livestock procurement, to adjust for capacity and cater for new customer requirements.
That was all last season. This is a new season. Lessons have been learned. As Allan Barber reported at the end of October, the 2012-2013 season was looking optimistic from the European perspective following the massive SIAL food fair in Paris. Add to that global meat demand is continuing its upward trend and the the fact that New Zealand meat has an exceptionally good reputation offshore and is the envy of many other producing countries, things ain’t looking so bad.
Omnishambles? I don’t think so.
