“I got it completely wrong … we’re conscious it caused a lot of pain for farmers and we’re very apologetic and disappointed.”
Alliance had, however, done a “reasonable job” of maximising prices, he told the opening of the three-day Alliance conference in Queenstown.
“We’ve buffered you as best we can.”
There had been a huge gap between the five-year global price average for sheep meat and what farmers received this year, he said.
“It cost us about $120 million in reduced revenue. We absorbed $16m of that pain to try to look after farmers.”
That was significant buffering given last year’s profit of $7.8m.
He talked about a three-year transformational strategy aimed at adding an extra $100m of value. The goal was to add another $34m over each of the three years.
By April it had achieved $35m, $14m ahead of the targeted $21m.
“That’s important because it shows we can fund the $16m gap between global sheep meat prices and what we paid you, the farmers.”
Driving the need for change was flat revenue and rising costs, the below-par prices paid for livestock, the need to create value chain profits and a clear message from banks to reduce debt.
Alliance had started removing cost from the business, reducing overheads by $138m to $125m over three years. Value-adding moves included increasing chilled volumes by 10% and growing the domestic market by 30%.
A strong message from bankers had led to a reduction in the seasonal debt peak of $350m to $120m.That also reduced interest costs.
The Alliance pricing model was now more transparent with fewer deals and clear price signals about what was happening in the marketplace.
“We don’t get the level of complaints around our pricing system that we used to.”
Surveyor said turning the co-operative around had been a bigger challenge than anticipated.
“We’ve stretched our relationship with farmers and employees but we have to get a shift in our business.”
