Thursday, November 30, 2023

SFF praises MFAT for navigating China-US tensions

Neal Wallace
Co-op chair says it would be ‘a tough day for NZ if we have to choose sides’ between the United States and China.
SFF Ltd chief executive Simon Limmer said last year’s record performance will be tough to repeat.
Reading Time: 2 minutes

THE chair of New Zealand’s largest meat exporter says foreign affairs officials have done an exceptional job navigating sensitive global tensions between its two largest customers.

Silver Fern Farms (SFF) Co-op chair Rob Hewett praised the Ministry of Foreign Affairs and Trade for traversing tensions between the United States and China, who together account for about 65% of the company’s sales.

“It will be a tough day for NZ if we have to choose sides,” Hewett told the co-op’s annual meeting in Dunedin.

CEO Simon Limmer visited both countries in recent weeks and said the situation is complex.

“It feels like the two nations are talking across each other, but for us we need them both.”

China remains a growth market and Limmer said it  is well ahead of others in terms of volume and value.

As an example of its importance, SFF now has 30 people in the Chinese market compared to two five years ago.

The US is its largest beef market.

SFF Co-op is a 50% shareholder with China’s Shanghai Maling in SFF Ltd, a processing and marketing business.

SFF Co-op announced a record net profit after tax for the year to December 31 of $94 million  ($51.5m in 2021) and equity of $438m ($369m).

Hewett said an analysis of prime stock prices paid last year found about half the increase was driven by what he called “fair winds that benefited all”.

The other half was attributed to the market gains from the company’s plate-to-pasture strategy.

Lamb prices for the first three quarters of 2022 peaked at 23% ahead of the five-year average, and beef at 14% ahead, before a major correction late in the year.

For the sixth successive year the co-op has paid a dividend or made patronage rewards to shareholders. This year it was $33.5m.

In addition, qualifying suppliers shared $10m of livestock premiums, a 50% increase on the previous year.

Hewett said changes to farming practice prioritising environmental issues and addressing greenhouse gas emissions are being demanded by consumers and will provide tangible rewards for producers.

The record financial performance of 2022 will be difficult to repeat, but Limmer said the new financial year has started according to budget.

SFF Ltd announced record revenue of $3.3billion ($2.8bn); earnings before interest, tax, depreciation and amortisation of $301m ($179.7m); and a net profit before tax of $262.6m ($143.5m).

He said he is optimistic for product prices and business performance in the coming year, though there are still market, global economic and geopolitical challenges.

“Disruption is a constant,” he told the meeting.

The ability and agility shown by staff to resolve issues through the covid pandemic gives Limmer confidence they can meet any new challenges, he said.

Shareholders asked about the pressure on farmers from meeting emission reduction targets and environmental regulations.

Limmer said SFF is well aware of those pressures and the importance of preserving the productive base, something that is not taken for granted.

Together with Fonterra, SFF last year went to the government and sought extra funding for methane reduction research because of this pressure, and the Crown made a significant contribution.

Questions were also asked about the disrupted processing season, which affected farmers. Limmer said it was caused by a combination of labour and some internal issues.

He said they are still short of labour but the issue is not as bad as last year.

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