Five months into the new financial year Silver Fern Farms chief executive Dean Hamilton said the company’s trading performance was “materially better” than at the same time a year ago.
SFF slumped to an operating loss of $7.5m in the previous year to the end of September 2016.
Then the company blamed a “perfect storm” of sharp falls in in-market prices for both sheep meat and beef during the first half of the year, lower and unseasonal stock flows and a strengthening currency.
SFF went into the new financial year on January 1 with a breeze at its back after a large chunk of Shanghai Maling’s investment of $261m in return for 50% of the business was used to clear term debt.
Wiping the slate meant interest costs would be in the low millions compared to $14.8m in the 2015-16 year.
Hamilton said trading performance to date was also healthier despite sluggish livestock flows in the first half of the year as farmers held on to stock to take advantage of a good season for grass growth.
“Five months into the year we are trading materially better than last year … market prices have been much better this year.”
The pick-up in prices to farmers at the tail-end of the season had been matched by near-record in-market prices.
“The consumer around the world is paying higher prices for red meat, which has allowed us to pay good prices for lamb and for a prime animal or venison and the margin has been bigger than it was last year.”
Thin inventories among NZ rivals and within the offshore supply chain meant a correction lower in prices in overseas markets was not yet on the horizon, Hamilton said.
“Not at this stage. At some stage people will take a view that that is now too expensive to eat and my view is that the NZ industry needs to be mature at this point in the consumer cycle and not push for the last 10c price movement that it ultimately might regret.”
In the meantime, SFF was focused on rolling out its branded retail strategy in the United States, China and Germany.
But the recent start to a chilled trial for NZ exporters to China had caused it to pull back there for now.
The trial meant the company had had to switch from working on an all-frozen strategy to something different.
It was now unlikely to hit its target of SFF-branded packs in 500 retail outlets in China by the end of this year.
“That is still our ambition but we will be a year past that. We will certainly have runs on the board this time next year.”
Runs on the board were also something SFF shareholders were clearly still searching for with the company’s share price on the Unlisted market languishing at 52c last week.
That’s below the $1.30 the shares were trading at before the September 2015 vote to recapitalise the business and well below the $2.80 the Shanghai Maling transaction valued the shares at.
Asked whether that was indicative of a lack of confidence in SFF to execute its strategy Hamilton said the share price reflected the company’s track record of not having paid a dividend out of normal earnings for five years.
“They want a track record.”
Although looked at another way, Hamilton said adding the current share price to the 30c special dividend paid following the business’s recapitalisation earlier this year represented a 130% gain for shareholders on the 35c shares were trading for immediately before the announcement of the offer from Shanghai Maling in the middle of 2015.
