Many avoiding discussions on meat industry

Tighter supply and slowly recovering economies in Alliance Group's major markets are offering an...
Tighter supply and slowly recovering economies in Alliance Group's major markets are offering an improved outlook for the new season. Photo by Gerard O'Brien.
Wider meat industry discussions over its structure are involving too small a group and there are ''a whole lot of people'' not bothering to attend, Alliance Group chief executive Grant Cuff says.

Addressing a shareholders-suppliers meeting in Oamaru this week, Mr Cuff said it seemed an ''awfully big chunk of the industry just doesn't want to discuss it any further''.

''Those of us that are willing and trying to talk still do, but you can't do it in isolation,'' he said.

Chairman Murray Taggart said Alliance Group participated in a project with other major industry participants to investigate whether a better industry structure was achievable.

The group had been unable to develop a proposal that had universal support from within the group and from the wider industry.

''We may not like all aspects of the current commercial industry model but the reality is, no-one has managed to come up with a better one,'' he said.

Co-operatives with farmer owners tended to have a different position to companies that did not have farmer owners.

''There are different people in the room that have different reasons for their place in the industry,'' he said.

Discussions were ongoing and it would be irresponsible if the company did not take part in them, he said.

Alliance Group had an open mind to commercial consolidation opportunities in the industry but they had to stack up ''and big bang mega-mergers don't fall into that category''.

It would be a high risk strategy to go down that path, he said.

Windsor farmer Grant Ludemann congratulated Alliance Group for the work it had done on getting multi-species processing plants and addressing the issues of rationalisation, but also sounded a note of caution.

''I recall, quite vividly, the financial strife Alliance was in some 20 years ago. I just ask the directors and the management to be aware never to put this company in that position again,'' he said.

Mr Ludemann believed the company was ''on the right lines at the moment''.

Mr Cuff said the red meat industry had not failed.

A lot of change had occurred and was occurring, in the industry, in the world and in agriculture.

''We're moving with that. We believe the changes we've made so far have been, within our industry, significant and successful.

''We believe we are continually and successfully evolving as the world changes around us,'' he said.

Mr Taggart said 2013 had been another tough year for meat processors and exporters, particularly in the first quarter.

Financial results for the recent financial year would reflect challenging market conditions and dispel any suggestion that lower schedule prices were to enable companies to rebuild their balance sheets, he said.

Last year, the co-operative plunged into the red, reporting its first operating loss ($57 million before restructuring costs) in 20 years.

This year's result would be announced ''in due course''. At this stage, subject to audit, the company was profitable, with good equity ratio and operating cash flow, Mr Taggart said.

However, profitability remained at unacceptably low levels and there would be no profit distribution or dividend to shareholders.

He said emerging market access had been challenging for the company, a reference to the situation at its Pukeuri plant, when its certification to export to China was revoked, causing 240 workers to be sent home.

''Some of this has been of our own making and some outside of our control.

''The reality is that the customer is always right,'' he said.

It was up to the company to understand and comply with the requirements of the importing country.

The company had upgraded its system to avoid a repeat of the access issues.

Overseas markets remained sluggish, particularly for higher value cuts.

The Chinese market continued to experience strong growth and, while it offered exciting potential, Alliance Group was conscious of the risks of over-reliance on one market.

Looking ahead, tighter supply and slowly recovering economies in the company's major markets offered an improved outlook for the new season.

Last season, Alliance Group introduced an advanced payment on lamb supply, through platinum and gold suppliers, and the initiative was well received, Mr Taggart said.

The push to reward loyal suppliers continued and this season that advance payment was being extended to prime cattle and deer.

The company was also introducing paying of stock cartage from the start of January.

Mr Cuff said the company was picking $90 to $100 a lamb for the new season.

sally.rae@odt.co.nz

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