NEW ZEALAND-MEAT GIANT PERFORMS WELL IN 2008.
ANZCO Foods improved its profit in the 2008 year without being able to take full advantage of meat industry price improvements.
The reasons for this were the focus on selling a high proportion of chilled beef products into Asia on longer term contracts and not having spare capacity to process the high lamb numbers being sent away by farmers last season, said chairman Graeme Harrison.
ANZCO made a bottom line profit of $15.63 million in the year ended September 30, up from $5.68m a year earlier.The result was recorded on revenue of $1.12 billion, compared to $1.03b a year earlier.
It is widely regarded as one of the strongest and best operating meat companies but its major competitors - Alliance Group, AFFCO Holdings, and Silver Fern Farms - achieved greater profit growth because they could kill as many lambs as were offered to them last year and were better able to secure the price gains in their markets.
ANZCO supplies virtually all the chilled beef sent from New Zealand to Japan, and more than 40% of total beef volumes. Harrison said the market has not been an easy one in recent times, though trading was better in the September 2008 year than it was in 2007. He noted the big fall-off in Japanese import and export activity over the last several months due to the global recession.
ANZCO is 60%-owned by Japanese interests, though governance is in the hands of resident NZ directors. The profit for the privately held company was released on the NZ Companies Office website late last month. It does not publicly report its result close to the end of its financial year, as the other majors do.
The company physically imports and distributes its own product into Japan, and has to fund the business through the 90-day period which customers have to pay. As a comparison, ANZCO guarantees payment in three days to its NZ beef suppliers.
This arrangement means the company carries significant level short term debt pending payment. At balance date, this debt totalled $122.3 million.
The overall level of borrowings was $148.8m, significantly lower than the 2007 figure of $174.9m. Core long term debt at September 2008 was $26.5m. The ratio of debt to debt plus equity was 48%, with the ratio of borrowings alone being 34%. Total assets were $441.6m, down slightly from $449m a year earlier.
Harrison said a very strong balance sheet was a consistent feature of ANZCO’s long term trading performance.
Total interest costs were$14.7m, covered 2.45 times by earnings before interest and tax (Ebit) of $36m. This was an improvement on the previous year when interest cover from Ebit of $24.05m was just 1.59 times.
Receivables at balance date were $82.6m, and the company also had $89m in inventory, down from $97.6m a year earlier.
ANZCO achieved a big improvement in operating cash flow, up to $46.55m from just $9.38m a year earlier.
It has manufacturing beef plants in Otago and Taranaki, which Harrison said were a useful and growing part of the overall business, with trade on the manufacturing side more buoyant than that for the higher value steak cuts in the present difficult markets.
Having new processing plants at Rakaia and Waitara affected the 2007 result and Harrison said business was steady at those plants in the 2008 year.
As well as its strong Asian presence, ANZCO has sales offices in continental Europe and United Kingdom, and is a 31% shareholder in the New Zealand Lamb Co in North America.
The lamb market was steady, but he warned that the wider industry had to be careful not to push prices up too high or it would meet consumer resistance, particularly for middle cuts.
The spike higher in the dollar over the last several weeks was the biggest issue for the industry. "How can you work in that environment?’’ he asked.
This coupled with the lamb kill falling away quickly because of the fall-off in stock numbers and increasing retention of ewe lambs by farmers, would mean very difficult trading for the meat companies over the next two to three months.
