The value has been written down by $1.4 million to make up a large part of the company’s loss of $1.9m in the year ended March 31.
Buying it in late 2014 appeared to make sense, but the timing proved to be poor, chairman Scott O’Donnell said.
New chief executive Todd Grave, who joined the company half-way through the year, said that closing it for the season under review meant the plant had not been exposed to the unfavourable supply and demand conditions prevailing.
Weather-related delays to the new rendering plant at the Morton Mains processing base in Southland also meant rendering operations had to stop for some periods, causing significant lost income for nine weeks, with a net impact of about $860,000. Rendering was a profitable and important part of the business, and the plant was now fully operational, Grave said.
The other factor in the overall loss was the $163,000 of cost incurred in dealing with the takeover offer from Binxi NZ that could not be recovered from it.
The Morton Mains plant generated a small pre-tax operating profit during the year.
Revenues and volumes were lower but selling prices rose, with revenue per kg ending the year significantly higher than the previous year, and margins also higher.
Though annual profitability remained unacceptable, the results for the first three months of the current year were double the level anticipated, Grave said. Blue Sky had also more than doubled the volume of chilled lamb exports, as well as making savings across the business.
Revenues for the year were $98m, down from $117.24m a year earlier, when another $1.9m loss was recorded. In both years, the pre-tax loss was greater - first $2.7m and then $2.55m – but substantial tax credits helped the bottom line.
Operating cash flow fell to $2.29m from $10m a year earlier.
The annual report said that Grave’s first move was to institute a strategic review of Blue Sky Meats, leading to a plan for 20 projects to produce a targeted $7.8m in added value over a three-year period. The theme of the programme is modernisation, simplification, and innovation, and included year-on-year doubling in chilled volumes.
About $1.5m in added value was produced in the first three-months of the strategy, double the amount targeted, Grave said.
O’Donnell said he believed the group had the ability to operate profitably.
Chinese-owned Binxi NZ launched a takeover for Blue Sky Meats in November last year, receiving board support in January. However, Overseas Investment Office (OIO) approval was not received before the offer closed. This has since been given, and Binxi remains the group’s second biggest shareholder with a 17.7% stake.
