In notice of meeting documentation being sent to shareholders, chairman Rob Hewett said banks twice last year warned the co-operative they would not “under any circumstances” provide ongoing finance unless shareholders approved a new injection of capital.
Hewett said in an interview that nothing had changed since those warnings were issued in May and June last year.
Lenders were concerned at the risk they carried, SFF’s inability to raise new shareholder equity, volatile earnings and its working capital requirements.
“We had a good year last year and it looked like the pressure would come off but the reality is we are one year away from the edge of the cliff and this year has been challenging for everyone,” Hewett said.
In contrast, shareholders who had requisitioned a meeting to overturn deal were not offering answers to the ultimatum from lenders.
The notice of meeting depicted a company given some breathing space by banks but without new capital faced a future with higher lending costs, financial constraints, discounted recapitalisation and major restructuring.
This week SFF warned of a likely break-even annual result compared to an earlier forecast healthy profit.
Hewett also revealed in the meeting notice the company had this year failed to meet several covenants required under its debt facility agreement, adding that bankers had not yet acted on those breaches.
SFF chief executive Dean Hamilton said the meeting documentation was intentionally direct to refute what he called “uniformed and misleading” claims from the requisitioners.
“The board decided it needed to be very direct and very clear so shareholders understand the position of the company without any doubt.”
It countered accusations levelled by the requisitioners about the board’s handling of the transaction, claims Hamilton said were rejected by independent bodies.
Yet the requisitioners had never supported their accusations with their own independent advice.
Hewett said most shareholders were confused and frustrated at being asked to again vote on a transaction 82% of voters approved last October.
The documents showed the board reaffirmed its unanimous support for the transaction and Hewett reiterated that regardless of the outcome of voting at the August 12 special meeting in Dunedin, the board would work to complete the transaction.
He doubted the result would be reversed and encouraged shareholders to vote, confident most would again support the deal and the opportunities he said it provided.
Hewett said contingency work had been done in preparation for any subsequent court action but he hoped it would not be needed.
In figures provided to shareholders Silver Fern said it had budgeted for $61.1 million pre-tax and $46.4m after-tax profit.
But the results were clearly disappointing, the directors said.
The value and volumes of livestock being processed had been less than expected during the first half of the year.
Trading conditions remained challenging since the difficult first half-year to March 31 when a $2.6m pre-tax loss was recorded, compared with a profit of $50.6m last year and a budgeted profit figure of $43.4m.
First-half turnover was $1.03 billion, down from $1.22b. The operating earnings (Ebitda) figure was $19.9m down from $76.5m.
With a “lower but longer” processing season expected debt was likely to stay elevated for a longer period through the second half than was budgeted.
Meat processors had been affected by an unusual combination of factors:
# A sharp and unexpected decline in in-market prices for many beef, lamb and mutton products.
# Unexpected weather causing an unusual livestock flow with strong grass growth causing farmers holding onto stock.
# A strong store market made replacement stock expensive compared with further finishing of existing stock.
In the nine months to June 30, national lamb process numbers were down 3% and cattle 4% lower.
The forecast break-even September 30 annual result compared with an Ebitda last year of $86.9, a pre-tax profit of $27.2m and after-tax profit of $24.9m.
