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Silver Fern Farms back in black after Shanghai Maling deal; Cooperative in the red

Tuesday 3rd April 2018

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Silver Fern Farms returned to profit last year as a capital injection from China's Shanghai Maling trimmed the meat processor's finance costs and global beef prices rebounded, although its cooperative shareholder posted a loss from the new structure. 

The Dunedin-based company reported a profit of $15.4 million in calendar 2017, turning around a loss of $30.6 million a year earlier, with sales rising to $2.2 billion from $2.15 billion in 2016, it said in a statement. Earnings before interest, tax, depreciation, amortisation and abnormal charges climbed 59 percent to $50.9 million.

The bottom line was hit by a $10.2 million charge on the closure of the Ashburton processing plant last year, offset by finance costs of just $3.3 million compared to $14.8 million a year earlier.

"We are pleased to see an improved result," said Rob Hewett, chair of the cooperative, which owns 50 percent of the meat company. "This was achieved on similar levels of throughput, and reflected improved in-market conditions for sheep and venison, as well as a reduction in overhead costs following plant closures and management's ongoing focus on improving efficiencies." 

The country's biggest meat processor courted controversy in bringing Shanghai Maling on as a joint shareholder with the cooperative in late 2016, attracting opposition from the New Zealand First party which has since joined the ranks of government. The funds were used to repay debt, removing the threat of Silver Ferns' banking syndicate withdrawing support. 

That change in capital structure weighed on the Silver Fern Farms Cooperative's bottom line as the meat processor's shareholder changed its balance date to a December year-end, and diluted its holding of Silver Fern Farms Ltd to a half-stake. The cooperative reported a loss of $5.6 million in the 15 months ended Dec. 31. 

The meat processor paid a dividend of $12 million to its shareholders, $6 million to Shanghai Maling and $6 million to Silver Fern Farms Cooperative, representing 2.8 cents per ordinary and rebate share, and a patronage reward of 2.9 cents per share for qualifying shareholder suppliers. 

Hewett said the cooperative is confident the shareholder supplier benefits programme will build long-term value in the meat processor, with about 60 percent of livestock processed supplied by members of the cooperative.

"By providing additional value to shareholders who are suppliers we believe we will, over time, create more loyalty from our suppliers which will, in turn, contribute to increasing consistency and volume of livestock supply," he said. "We believe helping improve the long-term profitability of Silver Fern Farms Ltd (our single investment) will be to the benefit of all cooperative shareholders." 

The company's annual report will be available on April 4 ahead of the annual meeting in Dunedin on April 18. 

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