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Silver Fern Farms FY loss narrows to $28.6 mln, mulling options for sector overhaul

Monday 18th November 2013

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Silver Fern Farms, New Zealand's biggest meat processor and marketer, narrowed its annual loss as it deals with the "collapse" of the sheep meat market last year, and is mulling options for a sector-wide overhaul to inject some life in the industry.

The net loss narrowed to $28.6 million in the 12 months ended Sept. 30 from a loss of $31.1 million a year earlier, the Dunedin-based company said in a statement. Sales slipped 1.5 percent to $2 billion. The company blamed last year's sheep meat market spike and subsequent collapse for the two years of losses, and said it has completed a programme to work through the downturn.

"Market consumption and pricing continued to decrease in the first half of the 2012/13 year, resulting from further writedowns of balance date stocks," chairman Eoin Garden said. "In reality, the market collapse dramatically impacted upon two financial years due to large stock positions over the September 2012 balance date."

Last month SFF sold its Shannon fellmongery to Lowe Corp in a bid to cut the costs of pelt processing in the face of lower lamb numbers, it said.

The meat processor increased its funding lines as part of a new two-year banking facility, and slashed its operating cash outflow to $5.1 million in the year from a $104 million outflow in 2012.

SFF has hired PwC to carry out a strategic review of the business, with a focus on future options after the stalled industry aggregation discussions, which aimed to set up an exporting entity along the lines of Fonterra Cooperative Group and Zespri International. PwC is expected to report back mid-way through the season.

"It is clear something needs to change, and as a farmer owned cooperative it was incumbent on us to not only ascertain the appropriate path for out Silver Fern Farms' shareholders, but also how we can make a difference within the overall industry model," Garden said.

SFF said the outlook for the coming year is favourable with growing demand from China and reduced global supply of sheepmeat.

Shares of SFF trade on the Unlisted platform, and last changed hands at 50 cents, valuing the company at $50.2 million.

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