Silver Fern Farms turns loss after writedowns, soaring stock prices

Silver Fern Farms, New Zealand's biggest meat processor and marketer, posted a full-year loss after a drop in demand forced it to write down inventory valuations after it had to compete for livestock at "unsustainable" prices.

The net loss was $31.1 million in the year ended September 30, from a profit of $30.8 million a year earlier, the Dunedin-based company says in a statement. Sales fell to $2.03 billion from $2.1 billion.

The company says the 2011-12 season began with ideal pasture growing conditions, meaning farmers tended to hold back livestock. As a result, markets were short of product versus historical supply and global prices for lamb escalated "to unsustainable levels".

Then followed a sharp fall in demand and value that was reflected back to suppliers and resulted in writedowns to inventory valuations in the year of about $25.6 million.

Throughout, Silver Fern had to continue operating, including having to "compete for livestock at unsustainable prices".

The company's operating cashflow was a deficit of $105.6 million from a deficit of $7.5 million a year earlier.

Shares of Silver Fern trade on the Unlisted platform. They last changed hands at 83 cents, valuing the company at $83.3 million.


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There was a time when the two southern meat co-ops could've amalgamated into one co-op.
What a pity that the then Alliance Group and SilverFern Directors couldn't have put aside their egos and selfish aspirations.
If the amalgamation had have gone ahead then, at least some of the heat would be removed from procurement.
The real irony is that now the same farmers that benefited from the procurement war, must now fund the two co-ops losses.
"Hand me the disprin Fred, I think I need a lie down".

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There was a time when PGW was gonna snuggle up to Silver Fern. Nect minut it all went to custard.There was a time.............oh i wont go on.

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The problem is procurement at the farm gate - competition at the farm gate will ensure the most efficient (and therefore profitable) plants get the stock. The problem lies with weak selling practices in the international marketplace - too often we hear of companies undercutting each other. We don't need a mega-merger in the meat industry (single buyer/ single seller) - we need cooperative marketing (multiple buyers/ single seller). This was one of the major recommendations from the Red Meat Sector Strategy Report. While I may be oversimplifying a complex issue, amalgamation of Alliance and SFF is not a solution.

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