Return to profit: Blue Sky smiling

Blue Sky Meats' return to profitability spells an end to about two and-a-half years of turmoil in the international sheep meat industry, chairman Graham Cooney says.

Directors were ''quite rightly proud'' of how the Southland-based company had not only survived but moved forward in a time when the sheep meat processing and exporting industry had reputedly lost $200 million, he said.

The company has recorded a $1.946 million after-tax profit for the year to March.

That compared with a $3.8 million loss for the previous year, a $449,149 loss in 2012 and a $3.6 million profit in 2011.

The management of the early part of the financial year ensured the residues of the ''disastrous'' previous 18 months were finally erased, Mr Cooney said, in the company's annual report.

The remainder of the year was a ''definite return to normality''. Profitability was steady and it reflected a market for the company's products that was strong and gradually increased.

However, Mr Cooney said industry challenges had not changed and, if it was to move forward, the status quo was not an option.

The vast majority of the industry problems were in New Zealand, not offshore.

The offshore challenges could only be fixed when the New Zealand problems had been ''dealt to''.

The industry was production-led but every successful sustainable industry in the world was market-led, he said.

The financial advantages of having a properly planned processing industry were at least $5 a head of lamb or mutton.

The lack of trust between many suppliers and their meat company was a ''mirror image'' of what happened between exporters from New Zealand and offshore importers.

Transparency at all levels was the only way to solve the mistrust issue, he said.

Late last year, southern-based co-operative Alliance Group revealed it entered into negotiations over a potential purchase of Blue Sky Meats, but no agreement was reached.

Mr Cooney said once an approach had been made, the directors of a public company could not ignore it and must investigate the offer, rejecting it only if there were ''a number'' of material concerns that made the offer unacceptable.

Negotiations with Alliance Group were respectful and amicable but, after two months, the board of Blue Sky Meats determined the offer was not in the best interests of its shareholders or suppliers.

There was ''no intention'' by either party that the discussions were to become public.

''The fact that occurred was outside the control of Blue Sky Meats,'' he said.

Mr Cooney said Blue Sky Meats had made some ''game-changing'' moves over recent years, including a planned approach to maintaining a strong balance sheet.

Investment in a rendering plant and a skin salting operation had added significantly to profitability, while a carefully considered approach to the rapidly expanding Chinese market was now paying dividends.

Two years ago, the company recognised the reality of lower stock numbers and reconfigured its shifts.

That resulted in improved profitability while maintaining individual worker incomes, he said.

Lean Meats, which has a plant in Oamaru, has announced a record pre-tax profit for the 2013 year of $2.6 million - a $6.2 million reversal on the previous year.

In the company's latest newsletter, chairman Rob Buddo described it as a ''satisfying'' result, saying the company had ''made a quantum leap forward''.

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