Turnaround for Blue Sky Meats

Southland processor and exporter Blue Sky Meats has turned around a poor performance last year to report a much improved $3.9 million after tax profit for the year to March 31.

This compared with a $282,000 after tax profit for the previous year, with the turnaround attributed to a high kill of capital stock from April to June last year and significant increases in returns due to improved market prices and a more favourable exchange rate.

The turnaround was marked by company revenue reaching $99.9 million, compared with $79.4 million in the previous corresponding period (pcp), while expenses were $94.3 million ($79.1 million).

A dividend of 15c a share will be paid, similar to previous years, except last year when none was paid.

Blue Sky Meats operates a small meat works north of Invercargill and chairman Graham Cooney said in the company's annual report that its size worked to its benefit in the past year.

While it could not take advantage of farmers suddenly wanting large numbers of animals killed, its opportunities came on the shoulders of the season, and last year it took advantage of the high kill of capital sheep stock from April to June as farmers converted farms to dairying.

The spring bobby calf kill was 12.5% higher than the previous year, but still historically low.

Mr Cooney said interest was strong from farmers wanting supply contracts, and the kill from December to February was high before dropping away.

The kill at balance date was 1.7% higher than the pcp.

Even though stock at the start of the financial year under review was similar in volume to the previous year, Mr Cooney said its value was 9% lower due to few French racks and the high exchange rate.

During the year, prices firmed and the dollar was more favourable with, for example, lamb legs increasing in price 34%.

Mr Cooney said partnerships developed in Asia over the past six to seven years allowed Blue Sky to double its market share in one country and brought strong returns from Japan.

Management has also visited China to develop business for higher value meat cuts following the free trade agreement signed between China and New Zealand.

Mr Cooney said the industry needed to manage lower lamb volumes and not ignore the hotel, restaurant and institutional trade.

The new season had started with prospects for lower stock numbers and a high exchange rate and Mr Cooney said the industry still had excess processing capacity.

Earnings per share was 33.75c compared with 3.85c pcp, while equity rose from $21,365 million to $25,255 million.