$90m turnaround expected for Silver Fern

Dunedin meat company Silver Fern Farms was expected to report a $90 million turnaround in its books this year, losing its reputation as the industry's lame duck.

Information on its financial position was included in an independent adviser's report by Grant Samuel on a proposed merger with rural servicing company PGG Wrightsons, and forecasts a net profit after tax for the year ended August 31 of up to $48 million, compared with a $42 million loss a year earlier.

According to provisional figures, the improved position was on the back of forecast revenue of $1.9 billion compared with $1.84 billion in 2007, and a sharp increase in earnings before interest, tax, depreciation and amortisation (ebitda) from $25 million to $152 million.

Improved financial results have been widely forecast by all meat companies, with both Affco and Alliance signalling stronger accounts on the back of better market returns and gains from a late-season easing in the exchange rate.

SFF's improved ebitda includes contributions from greater throughput, operating efficiencies and having tightly managed its inventory, which is down from $260 million in 2006 to a forecast $175 million this year, and debtors.

The report also noted SFF had successfully embarked on a debt-reduction policy.

Debt peaked at more than $600 million in April 2006 but had fallen to $105 million this year.

Non-recurring expenses associated with plant closures, part of Project Rightsize, were $38 million higher at $40 million, while proceeds from asset sales were expected to rise from $3 million last year to $31 million this year, including proceeds from the sale of its share of its central Dunedin offices.

Forecast lower sheep and beef numbers due to drought and land-use change would mean a return to normal profitability next year and affect all meat companies.

The report said SFF's lamb kill could fall from 7.4 million last season to 5.9 million and mutton from 1.7 million to 900,000, but beef, deer and bobby calf numbers would remain constant.

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