Silver Fern Farms Ltd would have been profitable last year but for a shortage of meat workers and the disruption and more than $30 million in costs incurred from Cyclone Gabrielle.
The company’s chief executive, Dan Boulton, told this week’s Silver Fern Farms Co-op annual meeting that changes in the accounting treatment of software also affected its bottom line.
For the 2023 financial year SFF Ltd, which runs the processing the marketing functions, reported a $24.4m after tax loss, and SFF Co-op, which owns half of SFF Ltd, a $10.75m loss.
Its Pacific and Dargaville plants were flooded by the cyclone, and Boulton said insurers have so far agreed to cover $23m of those costs.
Four months into the new financial year, Boulton said, SFF Ltd is trading profitably but factors such as an early kill, a flat supply peak and unknown spring conditions for lambing could still have an impact.
The financial pressures affecting sheep and beef farmers from low product prices and high costs were top of mind at what was a very subdued meeting in Dunedin.
Boulton, who three months ago replaced Simon Limmer as chief executive, said SFF’s plate to pasture strategy and using New Zealand’s environmentally friendly production systems, would lead the recovery of red meat prices and provide some insulation against future commodity cycles.
“Doing what we did yesterday is not enough to take us where we need to be tomorrow,” Boulton said.
He said the strategy has attracted and continues to attract high-worth customers prepared to pay premium prices for meat produced in a way that aligns with their values.
Boulton acknowledged returns to farmers need to increase and quickly, and his challenge is to leverage the strategy into higher values for farmers.
In response to a question, Boulton said about 12% of company sales are value add.
Chair Rob Hewett said the term “value add” has taken on a “halo effect” as consumers increasingly seek and pay more for SFF products other than packed product, because of the verifiably low environment production footprint.
Boulton said NZ cannot ignore global concerns about greenhouse gas emissions and environmental impact.
He said 80% of NZ exports go to countries that have mandatory or proposed disclosure on greenhouse gases emissions generated in the production of goods.
In addition, new and existing customers are questioning the greenhouse gas footprint of goods and services they buy.
“A sustainability focus isn’t just about attracting new product opportunities,” he said.
SFF will announce its Scope 3 emission targets, those generated from suppliers, later this year.
Questioned about the success of Net Carbon Zero beef, which was launched in New York in 2022, Boulton said scaling up has taken some time but the product’s profile is growing.
He said loyalty programmes for suppliers are also growing, with premium payments to beef suppliers last year increasing 14% and lamb 5%.
SFF last year paid $1.4m in premiums to qualifying suppliers who were part of Farm Assurance Programme plus (FAP+), with payments so far this year that are ahead of last.
Boulton said SFF’s balance sheet remains strong and the company is carefully managing costs, finding $80m in savings and cost avoidance despite a 50% increase in energy and 20% hike in insurance costs.
It is still prepared to invest where payback is quickest.
Last year capital expenditure was $106.8m, of which $70m was in its processing network.
“We are looking for 1% gains across the business and collectively, if you get lots of 1% gains, it has a big impact on the bottom line.”
