Silver Fern Farms confirms positive financial result ahead of Chinese JV

Silver Fern Farms, the countrys' largest meat exporter, has confirmed a positive 2015 financial result and further debt reduction as it progresses its planned 50/50 joint venture with China's Shanghai Maling Aquarius.

The company achieved a 28 percent improvement in earnings before interest, taxation and amortisation to $86.9 million for the year ending September on revenue of $2.45 billion, building on the turnaround achieved in the 2014 financial year. Net profit after tax was $24.9 million, up from $500,000 the previous year.

Last month shareholders voted overwhelmingly to support the $261 million investment by Shanghai Maling, which is subject to regulatory approvals from the Overseas Investment Office and Chinese state authorities. The OIO has indicated it could take six to nine months to process the application.

Chairman Rob Hewett said it was a positive audited result, delivered in an environment with a number of constraints.

"However, whilst a significant improvement on 2014, we still have progress to make to achieve a return that reflects the amount of capital we have invested in the business over the course of a season," he said.

The independent Grant Samuel report prepared for shareholders voting on the Shanghai Maling investment had forecast 2015 performance figures, including normalised ebit of $97 million, a slightly different measure from the ebitda figure Silver Fern reported today.

The company reduced its net debt by $168 million to $121 million over the past year through being profitable, reducing inventory, selling non-core assets, and winding down its investment in a dairy bull beef scheme, Hewett said. He has previously indicated the Shanghai Maling investment will leave Silver Fern Farms with the best balance sheet of any red meat company in New Zealand, carrying no debt and with a positive cash position by the end of next year, while holding funds it needs to update its plants and increase its value-add strategy.

Chief executive Dean Hamilton said the co-operative had achieved its goal of a material and substantial improvement in profitability and it was profitable across all species - beef, sheepmeat and venison.

"Beef and venison both had good results, and our big focus on turning around the performance of our sheepmeat business is starting to achieve results - with a meaningful profit, the first one in four years."

Year-end inventory was the lowest level for at least seven years, Hamilton said. The company's previous limited financial flexibility had made it difficult at times to respond to changing market conditions, and therefore livestock supply patterns from farmers, Hamilton said.

"We are confident that a combination of our improved financial performance and the new investment will provide us with more flexibility to respond to changes in the operating environment."

Teams from both companies have been set up so the joint venture can hit the ground running if regulatory approval comes through next year.

Under the deal, Silver Fern Farms's 6,200 farmer shareholders will get a special dividend of $35 million or 30 cents a share.

(BusinessDesk)