Meat co-op dilemma
Meat processor Alliance Group's cash-strapped farmer shareholders face a dilemma - either pour more money into the co-operative or risk losing 100% ownership and control.
The company has announced an underlying profit of $27.4 million on turnover of $1.8 billion for the year ending 30 September 2020.
However, a $19.9m provision – relating to the historic employee entitlement claim – saw its annual profit drop to $7.5 million before tax.
The meat processor says it is trying to resolve the claim for “historic partial non-compliance for employee entitlements” – known as donning and doffing – with a proposal waiting for ratification by the New Zealand Meat Workers Union.
Alliance’s poor result means there will be no profit distribution to shareholders this year. Chair Murray Taggart says the result reflects the “challenging operating environment” for the company in 2020.
Despite this, he claims it was a “credible performance for the company” – given the disruption and volatility in global markets due to Covid-19.
“The co-operative has faced challenges on many fronts. Like many businesses, we have been impacted by the pandemic,” Taggart says.
“However, our farmers also experienced extreme weather including drought, snow and flooding in parts of the country and difficult growing conditions.
“These on farm challenges also flowed through to the co-operative.”
Chief executive David Surveyor says the company’s response to these challenges was pleasing.
“We are proud of how our people across the business responded to the Covid-19 situation. Our people went above and beyond to deliver for our farmers, our customers and the country.”
He adds that while the season began with high protein prices for red meat, driven in part by African Swine Fever impacting the Chinese pig herd, there was a price correction as China took measures to curb protein inflation which reduced farm gate lamb prices.
“This was further compounded by the spread of Covid-19 across the globe and the resulting lockdowns, which resulted in people movement restrictions and massive disruption to the food service sector.”
Covid-19 also impacted Alliance’s processing operations with new operating protocols limiting capacity for farmers.
Surveyor says this year’s result excludes any money the company may be eligible for under the Government Wage Subsidy Scheme.
“Alliance and the Ministry of Social Development are currently working in a principled and constructive manner to resolve the amount Alliance is entitled to retain,” he explains.
“None of this amount will be recognised until discussions with the Ministry of Social Development are complete.”
He says the company has already returned money that was “not required for the purpose of retaining jobs and income.”
