“If it does happen, it won’t happen quickly.”
Blue Sky bought into a beef processing plant in Gore on indications from suppliers to its Morton Mains sheep meat plant in Southland that it could expect more of their other species, including venison, if it could cater for more of their needs.
“We were told it would make a difference and the next year will tell. We’re getting a gradual response but it’s not fast enough yet.”
Blue Sky made a $2.7 million pre-tax loss for the year ended March 31, reduced by a tax credit to an after-tax loss of $1.95m.
That was on sales of nearly $124m.
A year earlier the after-tax profit was $1.24m on sales of $102m.
The latest year was challenging, difficult and frustrating, Cooney said.
The sheep processing capacity was not being fully used and that part of the business had managed only to “break-even, plus or minus”.
The new Gore plant ran at a significant loss, partly because of some bad luck in the timing of a major upgrade to plant bought in late 2014.
Blue Sky scheduled the work for the middle of last year, a time when beef flows for processing were traditionally very light.
However, it coincided with the heavy dairy cow cull, which it couldn’t take advantage of because the plant was closed.
“The move backfired,” he said.
The plant was now open but did require more work to bring it up to grade.
Morton Mains was operating at full capacity for only 10 to 12 weeks of the lamb processing season, during which it was difficult to provide sufficient space for loyal suppliers.
Outside of that, it was challenging to remain profitable against significant costs, including paying for cartage and third party procurement.
Those costs were not fully recovered and the working model was a flawed one in that it led to the wrong industry decision-making but that was the environment the company was working in, Cooney said.
Blue Sky needed to be able to spread the kill across the year to be able to achieve better returns for farmers.
The Southland market was also very competitive, with six different outlets for lamb producers to choose from.
Blue Sky had put a new procurement team in place to build on supplier relationships.
The two major requirements for this year were to get the beef plant operating profitably and also to increase the market for chilled lamb after a major lift in production capacity two years ago.
After the departure of Ricky Larsen in December, the company was close to appointing a new chief executive who would have to face the challenge of how a small company could find more and bigger niche markets than it had now and also the challenge of whether a small company could do a better job of marketing its co-products, Cooney said.
Despite the poor result for the latest year, there were some positive features including a turnaround in operating cashflow to a positive $10m from an outflow of $5.26m a year earlier. Year-end borrowings reduced to $18.87m from $26m and the debt ratio had improved.
Borrowings financed 38% of total assets, down from 43%.
Balance date inventories reduced to $14m from $22.6m and since then had been sold down to the lowest level in many years, he said.
Blue Sky would not be paying a dividend, after a 5c a share payout last year. Shares last sold on May 10 at $1.30 on the Unlisted platform.
