24 Nov 2017

Alliance Group almost doubles operating profit

2:55 pm on 24 November 2017

New Zealand's largest sheep meat exporter has had a record year with revenue reaching a new high of $1.53 billion dollars.

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Sheep farming. (file photo) Photo: RNZ / Russell Palmer

Alliance Group almost doubled its operating profit in the year to September to just over $20 million compared to a year ago.

The co-operative is paying $11.4m in dividends to its farmers, up from $9.8m last year, partly because of better lamb prices.

Alliance Chair Murray Taggart says the co-operative is now much fitter due to a focus on lifting efficiency, lowering costs and capturing more value from global markets.

"The numbers tell a positive story. We are welcoming new shareholders, achieving a stronger balance sheet, improving our profitability and, most importantly, offering better livestock pricing for our farmers."

Although despite the good results, Mr Taggart said Alliance needs to perform better.

"We're pleased to see the improvement we've achieved, but for a company our size we certainly expect to do better going forward, and we need to do better going forward.

"If you look at comparable companies in other sectors they would be closer to $100m profit, that hasn't been the case in the meat sector traditionally and some of that is because as a co-operative we've trying to maximise the returns to our farmers up front as well as show reasonable profit."

He said this year sheep farmers will be get an extra $1.80 per lamb and $10 a head for beef.

Mr Taggart said there's been strong meat prices this year, but co-products, such as wool, are disappointing.

Chief executive David Surveyor agreed saying there is hard work ahead for the co-operative.

"Profitability is not at the level we want for a company of this size and we need to capture gains more quickly. Alliance Group needs to run faster."

This year the company has also improved its pricing structure for farmers.

"This includes offering more minimum price contracts, which provides greater certainty for farmers and ensures they can have greater confidence when budgeting."

The farmer owned co-operative has several projects underway to improve its processing facilities. This includes new robotic/primal cutting technology and reconfiguring the boning room at Dannevirke, upgrading the Lorneville plant, and investing in Pukeuri.

Alliance has just announced a new investment of almost $800,000 for a new blood processing room at its Mataura plant in Southland to help meet the growing demand from the pharmaceutical industry.

The new facility will collect and process adult bovine blood into serum for blood products, which will be used in the development of vaccines, cancer treatments, and drugs to treat neurodegenerative, haematological and endocrine disorders.

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