That has given Silver Fern Farms Co-operative, which owns half of SFF, a net profit of $34.9m. Chinese food producer, distributor and retailer Shanghai Maling owns the other half of SFF.
In 2018 SFF Co-op reported a $900,000 net profit.
SFF’s improvement was across the board.
Revenue for 2019 was $2.6 billion ($2.4b in 2018), earnings before interest, tax, depreciation and amortisation including a share of associate earnings was $123.4m ($32.4m) and net profit before tax was $89.6m ($6.3m).
Total equity in SFF rose $70m to $571m and in SFF Co-op it increased $35m to $304m. The co-op’s return on equity was 12.2%.
SFF Co-op chairman Richard Young said while the company benefited from greater demand in China because of African swine fever, changes to the way the company operates in that market by getting closer to customers and general operating efficiencies mean it can fully realise those opportunities.
“We made some changes within the business which made us nimble and efficient so we can capture more value than we have done in the past,” Young says.
While all products performed well, Young says being a large player in beef certainly helped.
“It was a good year for all products but beef certainly performed well.”
Given global uncertainties it was the right decision for the SFF board to take a conservative approach to liquidity and cashflow management, which includes deferring a dividend payment until there is more economic certainty.
“We remain confident that SFF is in a strong financial position. With cash on hand in the business they will be equipped to respond to the pending rise in consumer demand post covid-19 disruption,” Young said.
SFF chief executive Simon Limmer described the 2019 performance as a significant step towards its 2023 goal of achieving an aggregated profit over the five-year period of more than $150m.
Limmer says 2019 was challenging, starting with an uncertain international geopolitical and trade environment but then it became all about China.
“The impact of African swine fever on Chinese pork stocks drove global consumer demand for protein and countered any downsides of Brexit and United States-China trade issues.
“With customers in China looking to beef and lamb items to fill some of the void left by the culling of pigs it set a positive benchmark for other markets to follow and they responded accordingly,” Limmer sayid.
And this year has been full of challenges starting with volatility in China and stability in the rest of the world but then those positions completely reversing.
“Thankfully, those things all happened at different times,” he said.
Then came the countrywide shutdown because of covid-19 and the meat industry negotiating to operate under new protocols.
Now Limmer says the company is working with suppliers and shareholders trying to quit stock under those restrictions as late autumn dawns and drought lingers.
Global markets are very uncertain though he is confident China will bounce back reasonably strongly, noting signs Chinese are starting to relive their lives again.
During the lockdown there was substantial growth in online sales and retail and Limmer expects some of that trend will be permanent, which its Chinese partner Shanghai Maling is assisting.
The company invested more than $32m in capital expenditure in 2019 and $90m over the last three years and Limmer says further capital investment is planned but will be delayed till later in the year where there is greater economic clarity.
