The gains in the first year of a three to five-year programme with 128 individual projects were worth $56 million compared to the budgeted $34m, chief executive David Surveyor said at an early season roadshow meeting in Darfield.
It had targeted $100m of gains being added back to the co-operative over three years.
Surveyor has tackled every aspect of the group’s costs and sought operating efficiencies but said a lot more had to be done, including capturing Alliance’s share of the value chain.
The company’s banks had demanded it lower debts and that had been achieved, he said.
Alliance had not yet released likely profit figures for the September 30 year but the business appeared more profitable than a year earlier.
Indicative operating cashflow for the year was $120m, compared to just over $9m for the previous year.
"The profit this year is interesting but the balance sheet is most important as you need that to weather tough times and to make investments.”
David Surveyor
Alliance
At the start of the year, Alliance had core debt of $130m and seasonal debt took the total to about $350m at the peak, Surveyor said.
It now had no seasonal debt and core debt was down to $45m.
“The balance sheet is fundamentally different. The profit this year is interesting but the balance sheet is most important as you need that to weather tough times and to make investments.”
Alliance had shaved about $5m from interest costs over the year and end-of-year equity would be about 70% of total assets.
The mark-down of market pricing over the year had cut about $165m from group revenues but the savings made from the change strategies had allowed management to cushion the impact on suppliers.
About $136m of the “pain” had been passed on to suppliers via lower pricing but the company had absorbed $28.6m of the reduced revenues by using the $22m of savings to boost livestock prices.
There had been a big gap between most of last season’s market prices and the five-year average prices.
As soon as prices turned higher at the start of May, Alliance had increased the schedule.
Directors also intended to continue making advance payments to farmers, taking up about $40m a year, though the banks hated the practice.
“We know that’s critical to you so we will keep that in,” Surveyor told farmers.
He also targeted an improvement in the injury rate and the group achieved a 60% reduction in injury accidents over the latest year.
“Workers are entitled to get home safely every day but there is also a financial gain for the company in getting that down.”
High among the Alliance operating initiatives was a pilot programme in the United Kingdom dedicated to the food service market.
If the plan succeeded, it could add 15% to 30% in prices rises and lead to the programme being extended into other premium markets such as Germany and the United States, he said.
The group would work on value-add consumer-ready products and work with chefs and cooking schools as well as adding more resources overall to the UK.
The core UK lamb market based on supermarket supply to consumers had been hard hit by intense competition among the retail outlets, which reduced prices.
Alliance was negotiating to buy its Singapore agent for sales into southeast Asia. The group needed the leverage of actively being in the marketplace, Surveyor said.
Before he started the change programme a year ago Surveyor said the co-operative had had five to 10 years of flat revenues and rising costs and did not have the economic engine required to provide the livestock prices shareholders wanted.
