Tuesday, 07 May 2024 07:55

Meat co-op dilemma

Written by  Sudesh Kissun
Alliance chief executive Willie Wiese. Alliance chief executive Willie Wiese.

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.

Alliance needs more capital to strengthen its balance sheet, lift efficiency and pursue additional 'value capture' opportunities. However, weak lamb prices mean many sheep farmers are struggling to make ends meet, so forking out extra capital for the co-op will be a tough ask.

Farmer shareholders will hear Alliance's plans in the coming weeks.

Chief executive Willie Wiese says ultimately the future of Alliance Group as a co-operative depends on how shareholders respond to their capital raise.

"If farmers wish Alliance to stay a 100% farmer-owned co-operative, the only way that can happen is if shareholders contribute," Wiese told Rural News.

"We will be talking to farmers about the capital raise over the coming weeks. It is too early to speculate on other options until we have completed this process."

Federated Farmers meat and wool section chair Toby Williams says Alliance's call for more shareholders capital is tantamount to asking farmers to take bread off their own tables to keep the company afloat.

He says not many Alliance shareholders would be able to pump more capital into the company.

"Right now, it's hard for farmers and it's hard for Alliance," Williams told Rural News.

"For farmers, it's a tough situation, making sure we are paid, and our workers are paid. Alliance is asking farmers to take bread off their own tables to keep the company afloat."

Williams believes it is highly unlikely that Alliance will be forced to sell a stake to an outside investor as was the case with rival meat processor Silver Fern Farms.

"There's always a possibility but it's highly likely; for the investor market, buying a share in Alliance is not a palatable affair right now."

For the year ending September 2023, Alliance Group posted a pre-tax loss of $98 million, a dramatic reversal from the previous year's record $116m profit. Alliance blamed significant volatility due to geo-political tensions, labour constraints, inflationary pressures and weakening global markets for the shock result.

Wiese says farmers are of course disappointed and that's understandable.

"Times are tough on farm, so this is certainly not an ideal time to ask farmers for capital. A number of farmers I have spoken with appreciate the challenging situation we are in. They accept we are exploring all other viable opportunities to reduce working capital and they support Alliance remaining a co-operative."

Alliance's new chair Mark Wynne points out that New Zealand's red meat sector has been impacted by weaker global market prices.

"Farmers, processing companies and the agribusiness industry in general are facing significant financial pressure. Alliance Group is no exception.

"Our current trading position and forecast indicates we will make a modest profit this fiscal year, which will be a significant turnaround from our loss last year. This is in line with our financial performance over the last decade where Alliance has been profitable for nine of the last 10 years.

"Over the last 12 months, in particular, we have had a relentless focus on cost reduction, optimising market pricing and inventory in order to reduce our working capital requirements. We've made good progress on all fronts.

"However, a signalled at the co-operative's annual meeting last year, we do need to raise capital from our farmer-shareholders," Wynne says.

More like this

Chilled cow cuts enter China

Alliance Group has secured greater access for chilled beef exports into China following approval of its Levin and Mataura plants to supply that market. With its first load of beef from Levin clearing Chinese customs in early January and a shipment from Mataura recently arriving in China, journalist Leo Argent talked to Alliance general manager safety and processing Wayne Shaw.

Co-op boosts chilled exports to China

Alliance Group has secured greater access for chilled beef exports to China, following approval for two of its processing plants to supply the market.

Alliance Group re-set delivering results

Alliance Group has turned a corner on a challenging two years following a comprehensive re-set over the past 18 months and is forecasting a return to profitability, farmer-shareholders were told at the company’s annual meeting in Gore today.

Featured

NZEI unhappy with funding cut for teachers

Education union NZEI Te Riu Roa says that while educators will support the Government’s investment in learning support, they’re likely to be disappointed that it has been paid for by defunding expert teachers.

EU regulations unfairly threaten $200m exports

A European Union regulation ensuring that the products its citizens consume do not contribute to deforestation or forest degradation worldwide threatens $200m of New Zealand beef and leather exports.

Bionic Plus back on vet clinic shelves

A long-acting, controlled- release capsule designed to protect ewes from internal parasites during the lambing period is back on the market following a comprehensive reassessment.

National

Machinery & Products

New Holland combines crack 50 years

New Holland is celebrating the 50th anniversary of the introduction its Twin Rotor threshing and separation technology, which has evolved…

Iconic TPW Woolpress turns 50!

The company behind the iconic TPW Woolpress, which fundamentally changed the way wool is baled in Australia and New Zealand,…

» Latest Print Issues Online

The Hound

Double standards

OPINION: Imagine if the Hound had called the Minister of Finance the 'c-word' and accused her of "girl math".

Debt monster

OPINION: It's good news that Finance Minister Nicola Willis has slashed $1.1 billion from new spending, citing "a seismic global…

» Connect with Rural News

» eNewsletter

Subscribe to our weekly newsletter