Tuesday, 12 April 2022 11:55

Silver Fern Farms profits handsomely on strong meat prices

Written by  David Anderson
SFF chair Rob Hewett says despite all the challenges it experienced last year, the meat company recorded a record profit while farmers received record prices. SFF chair Rob Hewett says despite all the challenges it experienced last year, the meat company recorded a record profit while farmers received record prices.

Strong farmgate prices for red meat have also flowed through to better returns for processor and exporter Silver Fern Farms (SFF).

The country's largest meat company has just announced its full year results for the 2021 year, which show a significant lift in profits for both its farmer co-op SFF Co-operative and parent company SFF Ltd - a 50/50 joint venture with Chinese-based Shanghai Maling.

SFF Co-operative reported an after tax profit of $51.5m for the year ended 31 Dec 2021 - up from $26.2m in 2020; while SFF Ltd's net profit for 2021 was $103.8m - up from $65.4m in 2020.

SFF Co-operative chair Rob Hewett told Rural News that despite the many challenges posed to the business during the year - not the least of which was dealing with Covid disruptions - it has continued to transform its business and profit from this.

"We've had two years of rubbish - in terms of the environment we have had to operate in - things like Covid, inventory bills, supply chain and drought in the North Island. It has been a bloody shambles, to be frank," he says.

"The fact that the team has been able to pull together and deliver such a result, speaks to not only how the compnay has performed but strong demand for the product offshore."

Hewett says despite all the challenges experienced last year, SFF recorded a record profit and farmers received record prices. He believes the NZ agriculture sector is in a 'sweet spot' at the moment but warns that it can't afford to get complacent.

"Elevated prices attract competitors into the market and that's where things like non-animal protein become more of a threat," he warns. "If we don't react to consumer demand, we won't stay relevant."

Hewett says while it's important SFF continues to pass any value in the market at the moment through to farmer suppliers, the company is equally focused on converting its favourable financial position into longer-term confidence for its farmers.

"We'll do this by continuing to invest directly in the business and developing more market-led premiums," he says.

"The work we are doing to reduce the environmental impact of our processing operations is just one of the ways we're making sure we do the right thing by our customers and the wider community, who increasingly want to know that their red meat is sustainably produced," he adds.

"While we still have some way to go yet, we're confident that the direction we are travelling in will translate into higher returns for what we produce and a more positive outlook on the sector for our farmer suppliers."

Meanwhile, SFF chief executive Simon Limmer says strong global protein prices are currently masking the complexities of running the business.

"Demand and pricing for red meat across our key markets has been at historically strong levels but like all exporters we have been challenged in our abilit to operate at optimal levels and navigate supply challenges into market," he explains.

"Our 2021 results can be put down to the efforts of our staff who have continued fronting to work under challenging conditions and I'm incredibly grateful for all our site and logistics staff in particular."

Limmer adds that SFF's Plate to Pasture strategy remains unchanged, and that sustainability is becoming a core focus embedded into the company.

"While we are still early in this journey, we are accelerating Silver Fern Farms; transition to a nature-positive red meat brand, that incentivises low emissions and regenerative farming practices."

Limmer says that while supply chain challenges don't show any sign of abating soon, SFF is confident about the outlook.

SFF operates 14 processing facilities throughout NZ, employing 6,000 staff. Key markets include New Zealand, China, North America, the United Kingdom and Europe, Asia, and the Middle East.

Results at a glance for 2021

SFF LTD:

Net profit after tax $103.8m (2020: $65.4m)

Revenue $2,749.6m ($2,490.1m)

Total Livestock Premium Payments in 2021 $6.9m ($5.2m)

Earnings befor interest, tax, depreciation and amortisation (EBITDA) including share of associate earnings $179.7m ($125.7m)

A 100% imputed dividend declared in relation to FY2021 $46.7m ($26.2m)

SFF Co-operative:

Net profit after tax $51.5m ($31.6m)

Dividend to be received based on FY2021 $23.4m ($13.1m)

No debt. Cash and short-term deposits of $23.4m

Total Shareholder Equity of $369.0m ($327.4m)

Co-operative declares dividend and patronage Reward for shareholders totalling $18.4m ($8m)

100% imputed dividend of 12.9 cents per share payable to all ordinary and rebate shareholders

A 100% imputed patronage reward of 12.1 cents pershare is payable on qualifying shares to supplying shareholders based on supply during 2021.

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