Silver Fern Farms back in black after Shanghai Maling deal; Cooperative in the red
By Paul McBeth
April 3 (BusinessDesk) - 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 Hewlett, 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.
Hewlett 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.
(BusinessDesk)
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