Alliance weathers year to retain solid position

Owen Poole
Owen Poole
Alliance Group has weathered what chairman Owen Poole called a challenging year to September 30, to retain its solid financial position.

The Invercargill co-operative recorded an operating surplus before pools of $29.6 million on turnover of $1.4 billion for the 2009-10 financial year, down on the previous year's result of $42.1 million on turnover of $1.5 billion, the decline reflecting unfavourable exchange-rate movements.

Alliance had performed well operationally, and while record prices for sheepmeat resulted in the second highest lamb prices ever in New Zealand dollar terms, on-farm profitability "remains difficult", Mr Poole said in a statement.

Alliance will pay shareholders $16.5 million made up of $12.6 million in pools and $3.8 million in dividend. The pool payments are back slightly on the last two years - $15 million in 2009 and $20.5 in 2008.

In addition, farmers who supplied lambs which met Alliance's yield quality contract standards, received on average another $7.19 payment per lamb above the schedule.

Mr Poole said Alliance had delivered a balance between returns to suppliers during the year and end-of-year distributions.

In the year under review, the group achieved a massive improvement in its operating cash-flow surplus, which rose from $44.4 million the previous year, to $110.4 million.

Equity also rose sharply, from 69.7% to 81.5%. The company has no bank debt.

In 2009, $20.7 million was transferred to reserves, but there is no mention in the information supplied about similar intentions.

The cyclical nature of the meat industry is illustrated by historical financial comparisons of Alliance's accounts.

In 2008, turnover was $1.28 billion ($1.5 billion in 2009 and $1.4 billion in year under review), the operating surplus before pools was $67.9 million ($42.1 million and $29.6 million) and pool surplus distributions $20.5 million ($15 million and $12.6 million).

Alliance chief executive Grant Cuff said the single biggest influence on last year's accounts, was a 20% movement in the three main trading currencies - the United States dollar, euro and Sterling between the 2009 and 2010 seasonsThe negative impact of that change was felt mostly by the 7% reduction in turnover.

Mr Cuff said strong demand from markets and reduced inventory was reflected in its improved cashflow surplus.

Looking ahead, Mr Poole said prospects were positive for both shareholders and the company.

"Supply and demand fundamentals are favourable, enabling the company to selectively position products in markets where greatest value can be realised."

Meanwhile, two of Alliance's newest directors, who retire by rotation this year, face challengers.

Former Meat Industry Action Group members and Southland farmers, Jason Miller and Mark Crawford, are being challenged by Canterbury farmers Ian Stevenson of Cheviot and Murray Taggart, a former Alliance director, who is from Oxford.

The company's annual meeting will be held in Christchurch on December 17.


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