Chairman Murray Taggart says the result for the year to September 30 is more typical than the $10m profit for the 2018 year, which included a $2m gain from land sales.
Last year’s profit was the best in a decade or so because it reflects the company’s trading performance and gains from multiple areas of the business.
“We have done a better job capturing value out of the market and in a whole lot of areas. We are running the business a lot better,” he says.
“It is a game of 1% and not a silver bullet.”
Taggart says the year was far from easy, especially with a lower lamb kill and having to pay record stock prices but beef margins were higher.
The $20.7m profit came from $1.7 billion in turnover.
Shareholders will share in the distribution of $9m, which, for the first time, will come with imputation credits made possible following a law change instigated by the co-operative. There was no profit distribution last year.
Farmers will this year receive $1.50 a lamb supplied, 50c a ewe, $8 for cattle, $5 for deer and 50c for calves, which will be paid after the annual meeting on December 18.
The balance sheet and shareholders’ equity, at 63%, remain strong.
Taggart says the result reflects the co-operative’s drive to maximise operational efficiency, capture greater market value and grow its global food service sector. It was also helped by generally strong market prices.
“Global market prices for most species were generally strong across the board.
“The outbreak of African swine fever and the subsequent culling of the Chinese pig herd led to an increase in demand for other proteins such as New Zealand beef.”
Chief executive David Surveyor says farmers welcomed initiatives such as the free store stock facilitation service, which lets lambs be moved to other farms for finishing.
To improve farmers’ cashflow Alliance increased to $25/head the advance payment it makes for lamb.
During the year the co-operative upgraded its Dannevirke and Smithfield plants and opened a new venison plant at Lorneville.
“We continued to lift our beef processing performance with our Levin, Mataura and Pukeuri plants processing record numbers of cattle during the 2018-19 season,” Surveyor said.
The co-operative also continued work on its safety performance, targeting areas of risk and completing a programme to replace and upgrade all bandsaws with new BladeStop technology, which significantly reduces the risk of serious injury.
Taggart says the company has also invested in people with 2000 of its staff involved in training and work under way on the company’s culture.
Looking ahead Taggart says parts of the global meat market look positive.
African swine fever should continue to benefit beef while the Brexit debate looks less disruptive to the lamb trade than it did a few weeks ago.
Meat companies in the United Kingdom are seeking approval to export beef to China and if that extends to lamb it will reduce competition in the UK and European markets.
“That will be helpful for NZ and if they find a home in China, we won’t even see it.”
Some areas of the country have had excellent lambing but others less so while wet weather in Southland has slowed grass growth and stock performance.
Alliance has major capital spending plans for the coming year including a new computer system, continued plant efficiency and Taggart expects to make a market-focused announcement soon.
