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Alliance omits dividend for only 2nd time in decade even as sales rise

Friday 11th November 2011

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Alliance Group, the Invercargill-based meat company, has omitted its annual dividend for only the second time in about a decade, saying stock losses, volatility in financial markets and plant costs make it prudent to retain cash.

The company owned by its farmers reported record annual sales of $1.5 billion in the year ended Sept. 30, up 7 percent from a year earlier and eclipsing 2009’s peak of $1.49 billion. Its operating surplus before pool payments and one-time items fell to $20.7 million from $29.6 million.

“Looking forward at the world environment, there’s a wee touch of caution,” said chief executive Grant Cuff. “Liquidity will be an issue for companies and banks around the world so retaining a bit more is prudent.”

Alliance heads into the 2012 year with a robust balance sheet, with no net bank debt as at balance date and no bonds on issue. That’s a turnaround from its struggle years, 20 years ago, when it was nursing hundreds of millions of dollars of debt.

“Our assets are in very good condition now,” Cuff said.

The meat company was disproportionately hurt by severe snow storms in the Lower South island and North Island in the Spring of 2010, which cut lambs available for export by about 1.6 million. Both are key regions supplying Alliance meat plants.

It said record prices for livestock had helped offset the losses for farmers.

The latest year’s results included $19.4 million of one-time costs related to the closure of its Sockburn plant in Christchurch. As a result it is expanding capacity at other plants to handle cattle and venison and its overall capacity will actually be higher than before the closure of Sockburn, Cuff said.

The company paid out $3.8 million in dividends in 2010.

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