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Tuesday, 30 November 2021 12:55

Alliance reports meaty profit

Written by  Leo Argent
Alliance chair Murray Taggart says the 2021 performance was a favourable result after a challenging year. Alliance chair Murray Taggart says the 2021 performance was a favourable result after a challenging year.

Alliance Group has fought off soaring livestock prices and logisitcal challenges to record a healthy profit.

It has just announced an operating profit of $41.9 million before tax and distributions for the year ending 30 September 2021.

The meat processor's annual report was $8.5m of profit distribution will be made to its farmer shareholders - in addition to $16.7m in loyalty payments already paid over the course of the year. The co-operative's turnover was $1.8 billion.

Alliance's chair Murray Taggart says the improved performance - up from $27.4 million in last year's report and $20.7 million in 2019 - was a favourable result after a challenging year. He claims it reinforces the validity of the co-operative's reinvestment strategy, with several years of sustained capital reinvestment in cost reduction measures and livestock management reflected in the profit result.

The result also includes allowances for historical employee entitlements - known as donning and doffing - which cost the company around $19.9 million to settle.

Taggart says rising and recovering prices across all livestock markets helped keep farmers and shareholders on track. He also praised the way staff had effectively managed the response to Covid-19 and ongoing global supply chain issues.

"Similar to many New Zealand businesses, we have experienced significant global supply chain disruption over the last 12 months. Whilst pleased with the improved profit result, we had global customers seeking product which we could not load and ship at the rate we would have liked. This has had a meaningful impact on our inventory and cash flow," Taggart explained.

"Our people worked with farmers, transporters and shipping companies to make sure we could continue to move livestock off farms and utilise both our plant network and infrastructure to ensure this was almost invisible for farmers."

He says that Alliance offering a minimum price contract for lamb in mid-July, provided many farmers with increased security moving through the year.

"A free store stock facilitation service also allowed farmers to move excess stock to other farms are required, easing strains in time of regional drought."

Chief executive David Surveyor says he's proud of the way staff had responded to the challenges and opportunities during the last 12 months.

"One of the benefits of our balance sheet is that we have been able to use it in these times," he adds. "Global logistics and supply chains will be challenged well into the foreseeable future therefore we are improving systems and processes to speed our cash cycle."

Overall, Surveyor says it has been a strong year for the co-op.

"We kept our people, partners, and customers safe during all Covid-19 outbreaks," he added. "Our people deserve the credit for this year's result. They know how important it is that we meet our farmers' expectations and are always looking for ways to lift performance and deliver results."

Surveyor believes Alliance is now starting to see its investment in premium programmes deliver value to farmers.

"Farmers' support of the co-operative's premium Handpicked lamb and beef portfolio continued to strengthen as premiums for qualifying animals increased."

He says with the performance of the company's plants improving year-on-year, it had created greater processing capacity for farmers.

Alliance increased its cattle processing capacity by 10% during the year, with the addition of a new facility at Lorneville, and expanded capacity in Levin and Pukeuri.

"While this is good news for farmers and customers, we now need to leverage capacity and fully realise efficiencies if we are to achieve our ambitions."

However, Taggart warns the next 12 months will continue to be volatile.

"We have therefore endeavoured to balance our desire to reward our farmer shareholders with the need for caution in the face of ongoing global logistics disruption."

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