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Silver Fern Farms returns to profit, helped by currency drop

Friday 31st October 2008

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Silver Fern Farms, the meat processor whose tie-up with PGG Wrightson has been undermined by the global credit freeze, said it turned to a profit after sales rose and the currency fell.

Net income was $37.7 million in the 12 months ended August 31, from a loss of $79 million a year earlier, the Dunedin-based cooperative said in a statement. Sales rose 7% to $1.96 billion.

The outlook for 2009 is for a return to "a more realistic profit" with reduced procurement volumes, rising prices paid for livestock and slimmer margins, chairman Eion Garden said. Profit was eroded in 2007 by a high currency and weaker returns in export markets. In the latest year, the company shut plants in preparation for a dwindling supply of sheep and lamb.

Plant closures and related costs amounted to a net $25.3 million.

Wrightson yesterday said it is unlikely to complete its investment in Silver Fern in its current form because of ongoing financial market turmoil. The rural services company failed to settle the first $145 million payment of its $220 million purchase of a half stake in Silver Fern in September because some of its banks wouldn't approve the financing.

The two companies already have begun working together on procurement activities, a key part of the transaction, which was designed to ensure the company can obtain reliable year-round product to the export chilled meat market.

By Jonathan Underhill

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