ANZCO Foods has reported a strong profit for the 2023 financial year, putting some distance between itself and major meat companies that have reported large losses.
After what chief executive Peter Conley described as an exceptional 2022 for everyone in the meat industry, ANZCO’s revenue dropped marginally to $1.83 billion and its net profit before tax was cut in half to $60.9 million.
That compares with a pre-tax loss by Alliance Group of $98m and for Silver Fern Farms of $36m.
For both industry leaders the reversals from FY2022 to FY2023 were over $200m each.
Conley said ANZCO’s relentless attention to core business activities and strategies and growing returns from strategic investments were keys to success.
While profit was down from the record $147.7m in FY2022, it was still the third-best result in ANZCO’s 40-year history.
Indeed, the past three years in a group have been the best three in the company’s history, he said.
“FY23 was, however, an exceptionally challenging year.
“FY22 saw everything go up; FY23 saw everything go down.
“We had to manage all the volatility and rising costs, while coping with the biggest event of the year – depopulation, cleaning and restocking of the Five Star Feedlot because of Mycoplasma bovis.”
Conley attributed the good result to clarity with the business model, focus on efficiency, execution of the strategy, the strong support of sole shareholder Itoham Yonekyu Holdings, and good management of the supply chain.
Itoham had invested in management technology and computer systems for very tight supply chain control, derisking the exposure of large inventories in volatile trading conditions.
The value-add products had strongly contributed, such as beef patties for McDonald’s, beef jerky production and the Angel Bay range of ready-to-heat products at retail and foodservice levels.
ANZCO also produces a range of healthcare products from bio-tissues, like wound dressings, heart valve replacements and blood serum.
In total, 21% of revenue through FY23 came from New Zealand sales, Conley said.
ANZCO had a greater proportion of its export revenue from Japan than other NZ meat companies, enabling it to take products right through to retail.
“Otherwise, we sell to a mix of countries and markets very similar to all NZ and Australian meat exporters.”
In FY23 an office in China was opened, to join other offshore offices in Japan, Australia, North America, the United Kingdom and Europe.
“Our company can rely, however, on weekly consignments of finished cattle from its own feedlot, which makes us unique in NZ.”
Months of planning and consultation with the Ministry for Primary Industries went into the Five Star Beef depopulation and clean-up, he said.
All cattle were slaughtered by the end of 2022 and the MPI then had two months of cleaning time.
It took three to four months to bring cattle numbers back to full capacity and begin processing again.
“That meant our high-value niche products were out of the market for around six months.
“It was a considerable impact on our staff, suppliers and customers, who have now returned and supported us throughout, for which we are very grateful.”
The MPI’s M bovis fund covered the extraordinary costs of the whole exercise.
However, the restocking cost did show up as one of three reasons why an operating cash deficit of $42m was reported compared with plus $133.6m in FY22.
The other two reasons were a large forward purchase of value-add packaging and a big tax bill following the FY22 record profit.
Conley was asked for a detailed assessment of the lamb outlook, where so many NZ sheep and beef farmers are hurting right now.
He said demand from the higher returning markets like the United States, UK and Europe is starting to pick up and that the worst of the price downturn is over.
Post-covid markets rebounded in 2022 when consumers started to travel and eat out again.
But China lagged behind because the extended lockdowns and property downturns impacted personal wealth.
Consumers have been slow to resume discretionary spending on higher value foods.
Instead, they rebuilt their savings before venturing out again.
“I think we all underestimated the frugality of the Chinese and the size of that market is hanging over all our sheepmeat returns.”
Carcases are broken into a hundred different cuts and products and historically China has been a strong market for many of the lower-end ones.
“As China comes back, lamb will improve.”
