Fairton plant to close as Silver Fern downsizes capacity to keep pace with falling sheep numbers

Silver Fern Farms, New Zealand's biggest meat company, plans to close its plant at Fairton in what is the first move to address its processing over-capacity since China's Shanghai Maling took control at the end of last year.

Sheepmeat processing at the plant has slumped in the past decade, reflecting a regional decline in sheep numbers, as land was converted to dairying and grape growing, the company said in a statement. About 500,000 lambs were slaughtered at the facility north of the Canterbury town of Ashburton last season from "consistently" more than 1 million prior to 2010, it said.

Silver Fern Farms told some 370 workers affected by the closure today but rumours had already been swirling and the New Zealand First Party issued a statement last week asking if closure was imminent. There would be potential transfer options to other plants in the region, the company said today.

“Whilst we believe the pace of land-use change has slowed considerably, we expect sheep numbers to consolidate around current levels rather than expand in the foreseeable future. It makes economic sense to consolidate this volume at our nearby Pareora site which has the capacity to process the combined numbers," said chief executive Dean Hamilton.

“Pareora is a large multi-species plant, an hour down the road in Timaru," he said. "Consolidating at one plant will provide a longer season with higher staff retention rates. We have recently invested $7 million at Pareora to add to its capability.”

Silver Fern voted last year to sell a half stake in the business to Shanghai Maling for $267 million and the original cooperative of farmers now owns the remaining half stake, although Shanghai Maling has the casting vote on key strategic issues. The meat processor posted a loss of $30.6 million last year in what it called a "very challenging year across the industry".

The deal enabled Silver Fern to repay its debt, removing a threat from its banking syndicate to withdraw support. The company cut net debt to $107 million from $121 million a year earlier, and halved its finance costs to $14.8 million, it said in January.

The tie-up also enables it to tap Shanghai Maling's supply chain and parent Bright Food's wholesale and retail networks to distribute into China.

Hamilton said Silver Fern expects to have "230 available roles at our plants in Belfast and Pareora, as well as at Hokitika, and further roles at our sites around the country as the new season commences."

(BusinessDesk)