Thursday, August 18, 2022

Silver Fern makes record results

SILVER Fern Farms (SFF) increased revenue by 10% in 2021 and more than doubled net profit when compared with the year before.

Silver Fern Farms chief executive Simon Limmer says high world protein prices were masking the complexities of running the business.

Silver Fern Farms (SFF) increased revenue by 10% in 2021 and more than doubled net profit when compared with the year before.

The trading results have allowed the directors of the co-operative to substantially increase the dividend payment to 12.9c a share fully imputed, versus 5.5c from 2020.

Net profit after tax for the operating company rose from $65 million to $103.8m and revenue was $2.75 billion, of which approximately $1.75b was paid out to farmers.

The fully imputed declared dividend is $46.7m, which is 45% of net profit, split half-and-half between the farmer-owned co-op and Shanghai Maling Aquarius, a Chinese listed company.

The co-op’s share at $23.4m is $10m more than in 2020, from which it will retain $5m and make distributions to shareholders during April totalling $18.4m.

The directors have apportioned 12.9c a share to all ordinary and rebate shareholders and 12.1c patronage reward on qualifying shares to supplying shareholders.

Based on the closing share price of $1.50 on March 30, 2022, the combination is a 16.6% annual yield fully imputed.

Shareholders provide approximately 63% of all livestock processed by SFF.

SFF shares on the Unlisted platform have steadily risen in price during the past 12 months from a low of 84c to the current $1.50.

But while the share price has increased, chair Rob Hewett observed a paradox between current strong farm gate prices and low farmer confidence due to the extent and pace of change they are confronted with.

“While it’s important the business continues passing through the value in the market, the board is equally focused on converting our favourable financial position into longer-term confidence for our farmers,” Hewett said. 

“We will do this by continuing to invest directly in the business and developing more market-led premiums.”

He said the market-led programmes, just small at present, were aimed at putting more distance between livestock producers and commodity cycles.

“The first principle is to remain competitive with carbon, because our breeding country will get planted in trees if we don’t do anything,” he said.

“Because of our comparatively high cost of production for meat, we must respond to consumers’ drivers for sustainability, traceability, animal welfare and lower carbon footprint.”

He said that demand for meat products is firm, the outlook optimistic and that New Zealand is enjoying a covid premium in prices compared to other countries.

“Farmers are getting record prices at the farm gate and we have made a record profit, so everybody is sharing,” he said.

“In spite of the uncertainties and the covid problems, things are going very well.”

Chief executive Simon Limmer said high world protein prices were masking the complexities of running the business.

“Demand and pricing across our key markets has been at historically high levels, but we have been challenged to operate at optimal levels and navigate supply challenges,” Limmer said.

“Predicting, managing and mitigating change has now become our new ‘business as usual’.”

Capital investment was $60.5m into the nationwide 14 processing facilities, some of which date back 100 years.

The return on equity recovered from 10.7% to 16.05%.

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