Alliance Group is strengthening its balance sheet by increasing the amount deducted from those suppliers with insufficient shareholding and increasing the number of shares they must hold.
Currently suppliers who do not have sufficient share capital to match the volume of stock they process have $1/livestock unit deducted. This will now increase to $4/livestock unit processed.
In a notice to shareholders released on Friday morning, the board advised it has also approved an increase in the number of standard shares required to be held for each livestock unit processed, from 12 shares to 16 shares per livestock unit.
For those who are already shared up, the total deduction will be $3/livestock unit processed.
Deductions will commence immediately, although the full effect on suppliers will occur next year.
Chief executive Willie Wiese said although the timing is not ideal, the co-operative needs to strengthen its balance sheet.
“We acknowledge that times are extremely tough on farm, and this is not an ideal time to implement changes.
“We have explored all other viable opportunities to reduce working capital before seeking capital from farmers.”
Chair Mark Wynne said the red meat sector has been impacted by weaker global market prices, but given current trading position and forecasts, the co-operative will make a modest profit this fiscal year.
For the 2022-23 financial year Alliance reported a $97.9 million loss, which followed profits for nine of the past 10 years.
Wynne said progress has been made in the last year in reducing costs and optimising market pricing and inventory to reduce working capital requirements.
“However, as signalled at the co-operative’s annual meeting last year, we do need to raise capital from our farmer-shareholders.”
Capital demands have lifted at a faster rate than shareholder equity growth.
“In order to remain a 100% farmer-owned co-operative and continue to drive towards our goal of being NZ’s most efficient processor, an increase in shareholder equity is required,” he said.
Wiese told shareholders that lender funding is used for seasonal working capital needs only and the co-operative board estimates it will need funding in the order of $100m to $150m over the next few years. It will not be provided solely by the equity from farmer-shareholders.
The co-operative also announced improvements to its loyalty payment programme, which were signalled at last year’s road shows.
Farmers who supply 100% of qualifying lambs will now receive 15c/kg, an increase of 5c/kg; for the 2024/25 season that payment will rise to 20c/kg. For cattle and deer, the payment will be 10c/kg.
In Focus Podcast: Full Show | 26 April
Senior reporter Neal Wallace has been looking at the sheep sector and reporting on how farmers, processors, marketers and lawmakers are facing the challenges.
AgriHQ senior analyst Suz Bremner also joins the conversation. Not many people know more about what’s going on around the sale yards than Suz and as a sheep and beef farmer herself she’s got a first-hand perspective on how things are faring in the high country.
As usual we’ll check in with Federated Farmers – this week sharefarmer chair Sam Ebbett has some advice on how to avoid contract disputes over pasture covers.
