Thursday, July 7, 2022

Paid too much for too long: Alliance

A massive operating cash outflow highlighted the difficulties Alliance Group Ltd had in its loss-making year ended September 30.

New Zealand’s biggest sheep meat processor reported a bottom line loss of $50.8 million. This was after taking a $13.5m charge on the cost of shutting down the sheep and lamb processing chain at the Mataura plant in Southland.

The operating loss alone was $57m, compared with an operating profit of $20m in the 2011 year.

The operating cash outflow was $163.5m, compared to positive flow of $3.13m a year earlier.

Alliance warned in early October that there would be a loss for the year, being caught by a sharp deterioration in overseas market prices after paying out high schedule prices to farmers to secure lambs for processing.

It was the first operating loss for the company in 20 years, chairman Owen Poole said. “This is a very disappointing result.’’

It is the second bottom-line loss in a row, after the $9m deficit last year which included the costs of closing the Sockburn plant in Christchurch.

Sales for the year totalled $1.37 billion, down from $1.47b in 2011.

“We accept that many exporters and processors like ourselves did not respond to the changing economic environment fast enough, and in an intensely competitive industry, continued to pay too much for livestock for too long,’’ Poole said.

Despite the loss, he said the Alliance balance sheet remained robust. The only figure released on this was that the equity ratio at balance date had fallen to 51% from 75% a year earlier. At September 30, 2011, equity was $344m and total assets were $458.4m.

As reported earlier, there will not be any distributions to shareholders this year.

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