Lamb processing numbers were up 25% year-on-year as Southland-based Blue Sky increased procurement market share and expanded its supply catchment into Otago and southern Canterbury.
The company reported revenue up 34% to a record $140 million in the year ended March 31 and pretax profit up 36% to $5m. After-tax profits and other financial information will be released in the annual report.
The operating result is the best in the last eight years, building on the gains achieved last year when the pretax profit was $3.7m, following a loss in 2017.
The strategy to increase chilled and higher-value products is still in its infancy but this year Blue Sky will test value-add products on its way to selling branded, fast-moving, direct-to-consumer products, Grave said.
“We’re a very small company and the amounts are small so we can’t push aggressively too fast.
“We will grow organically and over the next three years will trial and build out our plans.”
As well as procurement and price gains the group is benefiting from greater efficiencies, improving the yield per kilogram from the lamb carcase.
A feature of the latest earnings report is that the small Gore processing plant, shut down at this time last year and slated for sale, is back in use and being used to process offal into pet food ingredients. Further opportunities are being explored for its ongoing use.
There was little buying interest in the small beef plant and as the process dragged on Blue Sky decided the asset should be put to use for the benefit of shareholders, Grave said.
The processing of offal into pet food ingredients had previously been contracted out but has now been brought back in-house. Gore is an obvious site for the work because the main Morton Mains processing site is working at full capacity.
Successfully targeting Otago and southern Canterbury farmers for supply helped achieve growth because it is focused on the shoulders of the processing season when space is available on the company’s single chain, being about 50% to 60% used, complementing the 100% use during the peak kill season in Southland.
It also means a longer processing season, with the winter close-season this year being just five weeks, compared to the usual eight weeks.
Blue Sky achieved greater efficiencies in organising transport, allowing it to source stock from further afield.
A total 742,000 animals were processed, which pleased the directors and management given the sustained high schedule prices and declining total sheep numbers.
While progress was significant across a range of activities and exceeded the targets set for the 20 enhancement projects adopted two year ago there are a lot of improvements remaining, he said.
Despite the Morton Mains infrastructure constraining growth, extra throughput was still achieved.
An $11m capital spending programme, including a new $3.7m wastewater treatment plant, is under way to increase efficiencies and reduce physical hazards.
Chairman Scott O’Donnell said the project will improve the quality of effluent irrigated to land, will address compliance requirements and reduce odour.
The last year was one of significant positive change and improvement.
Grave said many of the gains were made by the workforce, with the company’s injury-frequency rate decreasing by 40% over the last three years and 20% alone in the latest year.
