Alliance annual profit falls 25% as strong global supply saps sheepmeat prices

Net profit fell to $4.6 million in the year ended September 30.

Alliance Group, the world's largest processor and exporter of sheepmeat, reported a 25% drop in annual profit as the company competed more aggressively in export markets that were flooded with local product.

Net profit fell to $4.6 million in the year ended September 30, from $6.2 million a year earlier, the Invercargill-based cooperative said in a statement. Turnover rose to $1.49 billion from $1.45 billion a year earlier. The company said it had lost between 20-25% of its Chinese sheepmeat market, without being more specific.

Droughts, flooding and a slowdown in key sheepmeat markets such as the UK and China "has had a pronounced effect on our profit result," chair Murray Taggart said.

In May, NZ Farmers Weekly reported increased lamb volumes in China and Britain pushed down prices by 14% on an annual basis, with lamb production ahead of schedule in both markets. Prices for New Zealand lamb and mutton across both islands were down between 7.7% and 11% this week from a year earlier, according to AgriHQ data on farmersweekly.co.nz.

Alliance's Mr Taggart said the company had built up inventory when buying lamb and mutton from its supplier-shareholders in a weaker global market. Since then, stock levels were back within normal trading levels.

The company didn't mention Silver Fern Farms, having rejected a pitch from its shareholders to merge with the rival processor. In September, Silver Fern shareholders agreed to sell half the company to Bright Dairy's Shanghai Maling to recapitalise the meat processor.

Alliance said there would not be a pool distribution to farmer-shareholders this year, having paid $7 million in 2014, its first such payment in three years.

(BusinessDesk)