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Silver Fern posts FY operating loss

Friday 26th November 2010

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Silver Fern Farms, the meat company that has proposed a return to merger talks with rival Alliance Group, posted a full-year operating loss as margins were squeezed by a strong kiwi dollar and reduced lamb numbers.

The operating loss was $800,000 in the 12 months ended September 30, from a profit of $5.4 million a year earlier, the Dunedin-based company said in a statement. Sales fell 10% to $1.8 billion.

"We are working with an appreciating and volatile exchange rate, coupled with reduced lamb numbers - and this put pressure on margins," chief executive Keith Cooper said. In the first two months of the current year, the company has traded ahead of the year-earlier period "both financially and in livestock market share."

Operating earnings exclude $7.2 million of one-time restructuring costs and Silver Fern reported a net loss of $14 million for the 13 months ended September 30, having changed its balance date.

The meat company, whose shares trade on the Unlisted platform, has closed plants and reduced the number of processing chains to adjust to a plunging national sheep flock that has left the industry with over-capacity.

Last month it renewed its efforts to engage Alliance in merger talks, publishing an open letter to shareholders of both firms, of which some 30% are common, seeking support for an assessment of a merger.

The poll drew only a weak response of 517 shareholders and Alliance said it wasn’t in favour of renewing talks, which faltered two years ago. Alliance will raise the issue at its own annual meeting next month, though.

Silver Fern announced a one-for-five bonus share issue for the latest year. The shares last traded unchanged at 70 cents.

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