Silver Fern Farms has come through a difficult trading year with a stronger balance sheet, but a $5.1 million operating profit means no end-of-year distribution to suppliers.
Chief executive Keith Cooper said yesterday having addressed its debt and balance sheet, Silver Fern Farms (SFF) would focus on improving the profitability of the company and its shareholder suppliers in the coming year.
Mr Cooper said the company had weathered a difficult year well, in which currency fluctuations of 50% eroded margins and resulted in a $70.6 million fall in profit before member distributions, income tax and non-recurring items, from $75.7 million in the 2007-08 year to $5.1 million in the year to August 31, 2009.
Net profit in the year under review was $43.6 million from revenue of $2.015 billion, a rise of $25 million on the previous year.
But remove the $37 million gained from the settlement with PGG-Wrightson for failing to complete last year's partnership deal and other one-off items, and the operating profit was just $5.1 million.
Mr Cooper said the decision not to make an end-of-year distribution to shareholders might not be greeted well, but he was confident they appreciated the difficult economic conditions affecting all business and that the company was in transition to a market-led business.
"I believe our supplier base is mature enough to accept they got very good payments during the year," he said.
Prime lambs averaged $89, beef $4 a kg and venison $9.50 a kg, but the $5 million operating profit was not sufficient to enable a distribution to shareholders.
Chairman Eoin Garden said shareholders needed to take a longer view than the next year, which was consistent with the company's integrated supply-chain positioning.
Mr Cooper said in an interview improved profits should come from sales of its new value-added product range, collaboration and marketing partnerships with customers such as the French supermarket chain Intermache and changes to its exchange rate approach from long to short-term periods.
He said market share should not be a measure of a company's success, rather the profits received from marketing products and benefits from servicing customers.
The $43.3 million profit before tax was 18% higher than the $36.6 million reported for the previous corresponding period (pcp) and the net surplus was $43,597 million (pcp $37,572 million).
During the year debt was reduced $57.7 million to $184.5 million, including repayment of the $50 million of SFF020 Bonds.
Chief financial officer Kevin Winders said equity had improved during the year from 41% to 52%, but if the recent $23 million in new shareholder equity was included, the ratio would be 54%.
Net operating cash flow of $95.6 million was up from $61.7 million in the previous period but was boosted by the PGG-W settlement.
