Silver Fern Farms Reports Loss
NEW ZEALAND - New Zealand beef and lamb processor Silver Fern Farms has reported a net operating loss after tax for the 12 months ended 30 2012 of NZ$31.1 million (2011 profit NZ$30.8 million) from total revenue of NZ$2 billion.Silver Fern Farms Chairman Eoin Garden said that, despite an operational loss, the company’s balance
sheet was robust (44 per cent equity ratio); and significant investments had been made in 2012 to underpin
future growth, including new marketing initiatives (NZ$8 million) and the new Te Aroha plant (NZ$67 million).
In addition, Silver Fern Farms had also made a significant investment of NZ$4 million in FarmIQ in 2012.
Now in year 3 of the 7-year build timeframe, not only will FarmIQ become the enabler for farmers to
deliver the required product to meet Silver Fern Farms’ marketing and sales plans, but it will also
empower farmers to identify opportunities on farm to grow their productive capacity, thereby generating
more value from within their own farming businesses.
Mr Garden said it was important to highlight the commitment the company had made to forge ahead with
the implementation of the business’ overall growth strategy for the future of Silver Fern Farms, its
shareholders, suppliers and people, notwithstanding this poor 12-month financial performance.
“In the 2012/13 financial year Silver Fern Farms plans to invest a further NZ$22.6 million into brand
development and marketing initiatives to build brand equity, channel and market development, and
FarmIQ. That clearly demonstrates our confidence in, and commitment to, the growth path we have
charted for our co-operative,” said Mr Garden.
Chief Executive Keith Cooper commented that Silver Fern Farms operates in an environment where many
outcomes are beyond the company’s control but materially impact on the business.
“Climatically we went into the 2011/12 season with ideal pasture growing conditions which meant
livestock was held on farm for valid reasons. This resulted in markets being short of product versus
historical supply patterns. Off the back of this, we saw global prices for lamb in particular, escalate to
unsustainable levels, which resulted in a sharp fall in demand, and which then led to a significant decline
in value. This market correction was subsequently reflected back to suppliers and, in turn, caused write-downs in inventory valuations throughout the financial year of circa NZ$25.6 million. Through this period,
Silver Fern Farms had to manage business continuity – supplying to customers and operating processing
assets – which meant we had to compete for livestock at unsustainable prices which further contributed
to the problem."
Mr Cooper reiterated that while this was a poor year financially, strategically it was a progressive one.
“2012 marked a continuation of our unwavering commitment to executing our Plate-to-Pasture strategy.
This is a progressive and long term plan, which demands perseverance and determination, to ultimately
generate sustainable value for our farmer-partners, by meeting the modern consumer’s requirements.”
Over the last 4-years, Silver Fern Farms has invested in designing the brand detail and marketing
infrastructure required to drive a greater proportion of its revenue through premium value branded
products. “Our differentiated approach means that our brand has now become integrated across all
areas of the business - corporate, supplier service, operations, sales and consumer activities - and we
are now starting to see the benefits of this throughout the value chain,” said Mr Cooper.
While Silver Fern Farms’ final inventory position for 2012 was up versus the previous year, Mr Cooper
advised that this had decreased markedly since balance date, with the increased working capital being
driven by those higher balance date inventories.
Mr Garden also advised that incumbent director Angus Mabin, who retired by rotation, has been reappointed
unopposed, which gives the board confidence they have continuing shareholder support.
TheCattleSite News Desk