A slow lamb kill and inflated exchange rate pushed Silver Fern Farms' interim accounts into the red, but the result was better than that a year earlier.
The Dunedin meat co-operative reported a $14.3 million operating loss before tax in the six months to February 28, compared with a $16.5 million loss for the corresponding period a year earlier.
Chairman Eoin Garden said Silver Fern Farms (SFF) had maintained market share, but the national lamb kill at balance date was 1.5 million fewer than the previous year.
This, combined with inflated exchange rates which cost the industry $18 a lamb and $200 a prime steer compared with a year earlier, saw SFF's revenue fall 22% from $1 billion in 2009 to $784 million.
Despite this, SFF reduced debt in the past year by $153 million.
Bank debt as at balance date was $205.4 million, down $103 million, and bonds on issue were $76 million, $50.3 million less.
Its debt-equity ratio has improved to 43% compared to 29% a year earlier.
Mr Garden said that during the period under review the New Zealand dollar had strengthened 29% against the United States dollar, 21% against the pound and 17% against the euro.
He described the results as acceptable given the trading conditions and consistent with previous years.
Trading in March and April was positive as plants worked to capacity, allowing it to recoup the half-year losses and for accounts to return to profitability, he said.
Meat processing was a fixed-cost business and he said its seasonal nature meant plants were often under-used in the first half of the year.
The lower throughput of stock and a focus on reducing working capital saw inventory at balance date of $243.7 million, compared with $383 million a year earlier.
Mr Garden said the bulk of benefits from projects seeking to reduce working capital requirements, challenge the existing cost base and look for new ideas, would start to flow in the coming months.
"These gains are vital as we must ensure SFF continues to improve operating efficiencies to deal with the reducing margins in the sector, particularly given the current season where the grass market returns have provided returns to suppliers in excess of the market but at the expense of processors' margins."
Looking ahead, Mr Garden said if farmers chose to hold on to lambs this season it would have an impact on the company's performance.
Higher retention of ewe lambs to rebuild flocks would mean less available for slaughter this year but boost numbers in future years.
SFF has changed its annual balance date from August 31 to September 30, to align with the farming seasons.
This year's annual result will be for the 13 months to September 30 and next year's interim result will be for the six months to March 31, 2011.
