Allied Farmers profit lifts as livestock division outperforms

Rural services firm Allied Farmers reported a 60 percent lift in net profit on an improved result from its livestock division, particularly in the second half, and further cost reduction.

The Hawera-based company said net profit was $2.2 million in the year ended June 30 versus $1.4 million in the prior year. Pretax earnings were up 52 percent to $2.4 million, which was ahead of the guidance it gave in June when it forecast a 40 percent gain.

Its livestock division reported a 20 percent increase in earnings before tax to $2.7 million. Livestock sales performed well with commissions up 25 percent on the prior year, particularly in the second half due to higher levels of dairy herd sales, it said.

It noted, however, returns from the meat processing business were lower than the previous period. While volumes were consistent, turnover was 20 percent lower due to the impact of a decline in international prices for veal and skins.

During the year, its livestock division established a livestock financing unit, initially focused on financing service bulls but then expanding into other livestock financing. While it started from a low business, the business is already profitable, it said.

The company said it cut its corporate costs by 46 percent to $45,000 from $83,000. It also reduced its debt costs, replacing $600,00 of maturing bonds with a $550,000 three-year bond at a substantially reduced interest rate. In addition, holders of $1 million of bonds maturing in September have all agreed to roll them over for a further four-year term, also at a reduced interest rate.

"We are delighted at this vote of confidence from the bondholders," said chairman Garry Bluett. He noted the strong result for the 2017 financial year made it possible to negotiate improved terms.

Looking ahead, the company said its expectations for the current year are for "careful growth" in the livestock business, tempered with a flat outlook for the meat processing business as overseas prices remain low.

Allied Farmers shares last traded at 9.4 cents and are up 62 percent over the past 12 months.

(BusinessDesk)