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Alliance lifts annual earnings 28% as sharper operations offset strong kiwi, weak prices

Friday 11th November 2016

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Alliance Group, New Zealand's second-largest meat cooperative, boosted annual earnings 28 percent as plans to overhaul the business reducing debt and automating processing cut costs, more than offsetting weak meat prices and a strong kiwi dollar eroding revenue.

Pre-tax profit rose to $10.1 million in the year ended Sept. 30 from $7.9 million a year earlier, the Invercargill-based company said in a statement. Revenue fell to $1.36 billion from $1.49 billion a year earlier, though plans to improve the operations delivered gains of $56 million, ahead of the budgeted $34 million and debt was slashed to $41 million from $129 million. 

"The weakening of market prices and global volatility over the year reduced group revenues, but the value created from our strategy projects meant the cooperative was able to act as a buffer and absorb some of the impact on our farmer shareholders," chief executive David Surveyor said. "We would have liked to have absorbed more and remain committed to finding ways to pay farmers more for their livestock." 

New Zealand's meat sector has gone through a major shift this year with the country's biggest processor, Silver Fern Farms, getting approval to pool its assets into a new entity effectively controlled by China's Shanghai Maling Aquarius, while more recently Blue Sky Meats said China's Heilongjiang Binxi Cattle Industry Co was poised to make a takeover offer for the Southland-based firm. 

Alliance has changed its capital structure to get its farmer shareholders to share up relative to their supply, and introduced new automated systems to improve its operations, something it says it will keep doing. The company had shareholder funds of $302.5 million, down from $308.9 million.

The cooperative raised its dividend to its 5,000 or so farmer shareholders to $9.8 million, having not paid a distribution last year.

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