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Alliance Strengthens Position

11 November 2014

NEW ZEALAND - Alliance Group has reported a pre-tax profit of NZ$17.6 million and announced a NZ$7 million pool payment distribution to supplier shareholders, the first in three years, as the co-operative strengthens its position as New Zealand’s leading sheep meat processor and exporter.

The result for the year ending 30 September 2014, based on an improved turnover of NZ$1.46 billion, follows rising consumer confidence, the gradual recovery of the global economy, a growing demand for red meat products and improving market prices.

Murray Taggart, chair of Alliance Group, said the result and the outlook for the year ahead meant the company was well placed for further growth.

“Good international demand and the ongoing development of new markets indicate positive signs for the year ahead. The 2014 year has been one of consolidation and our improvement in profit reflects our continuing focus on operating efficiently.

“Our pool surplus payment to our supplier shareholders, as a result of our improved earnings, shows we’re serious about recognising the investment that farmers continue to make in the co-operative and rewards their loyalty and support.”

Grant Cuff, chief executive of Alliance Group, said the company’s global markets showed improved demand and increased pricing.

“The global demand for protein is growing and we have made significant strides over the past year.

“The ongoing demand from China for lamb and mutton has underpinned global supply and pricing. This growth, coupled with the country’s rising population, increased urbanisation and the emergence of a middle class, means China is now our largest export market for sheep meat.

“However, our traditional markets in Europe and North America also continue to show encouraging signs of recovery.”

Mr Cuff, who stands down as Alliance Group chief executive next month, said the company is making steady progress in developing new markets such as India and Brazil to ensure the co-operative enjoyed a diverse mix of customers.

While strong pricing in North America for beef was expected to level off once Australasian supply recommences, higher cattle prices are expected to hold over the coming year.

Major importers of venison are regaining confidence on the back of an improved European game season. Overall, 2015 returns for sheep meat and venison are expected to be at least similar to 2014.

“North America continues to dominate the market for manufacturing beef with prices surging at year end as manufacturers sought product to replace declining US domestic supply.”

Mr Taggart said there had been considerable debate and conjecture on the structure of the red meat sector over the past year.

“Our strategy is underpinned by our belief in farmer ownership and the co-operative model. We believe the improving confidence and the rising global demand for protein mean the fundamentals of the red meat sector are strong.

“We are open to identifying and considering any commercially viable solutions to address capacity issues in the industry which are in the best interests of the company.

“Fewer stock numbers both within New Zealand and worldwide support our long-term strategy to operate at the top end of the market.”

The net profit after tax and pool distributions is NZ$6.2 million (2013 NZ$5.6 million). Operating cash flow generated for the year is NZ$21.5 million (2013 NZ$89.1 million).

The company’s balance sheet remains similar to the improved position of last year with shareholders’ funds of NZ$296.7 million (2013 NZ$297.3 million) providing an equity ratio of 59%.
The result includes restructuring costs of NZ$2.9 million, mainly due to the ongoing demolition of parts of the company’s Mataura plant in Southland.

The pool distribution is being paid on a flat per head basis for qualifying stock – lamb NZ$1.50 per head, sheep NZ$1.00, cattle NZ$10.00 and deer NZ$5.00. These distributions are in addition to the yield quality payments over full schedule made to shareholders at the time of processing. Shareholders who supplied store lambs through the company’s store stock facilitation programme will also be paid a pool distribution of 50 cents per head.

TheMeatSite News Desk

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