A dramatic decline in the number of livestock processed has contributed to a 70% decline in last year's after-tax profit reported by Southland meat company Blue Sky Meats.
Chairman Graham Cooney said the company was not immune to the 15.2% decline in last year's South Island lamb and mutton kill, but the effect on the company was skewed because of an exceptionally high kill of stock in the previous year.
Mr Cooney believed there were signs sheep numbers had settled.
For the year ended March 31, Blue Sky Meats reported a 14.9% drop in revenue of $85 million ($99.9 million for the previous corresponding period) and an 11.6% decline in expenses from $94 million to $83.4 million.
Operating earnings fell 70% to $1.67 million from $5.6 million and the after-tax profit was $1.1 million compared with $3.9 million for the previous year, maintaining the company's impressive history of recording a profit in each of the last 16 years.
Mr Cooney said most of the profit in the year under review was earned in the last quarter of the year.
While Blue Sky maintained its share of lamb and sheep, competition with other processors for animals at the shoulders of the season forced it to at times withdraw from the market because it was not viable.
Competition was also fierce for calves, and Mr Cooney said the number processed was lower than the previous year.
Meat prices in the year under review have been at record levels and were steady, but returns to farmers were hit by a high exchange rate.
Mr Cooney said at 2008-09 exchange rates lambs last season would have averaged $110 to $120 instead of closer to $80.
Barring an economic meltdown, Mr Cooney said it was difficult to imagine international prices not staying at these levels, because of low supplies keeping pressure on prices.
Lower stock numbers and the subsequent reduced working hours for staff were reflected in the payment to suppliers and employees which fell from $88 million the previous year to $75 million.
Customer receipts were also well down, from $91.2 million to $75.4 million.
Total equity slipped from $26.2 million to $25.1 million because of higher losses from its hedge reserve, and earnings per share fell from 33.65c to 10.11c.
Mr Cooney said in his report the company would maintain a conservative dividend policy, which was this year set at 45% of the after-tax profit, $576,000 compared with $1.7 million the previous year.
Directors have recommended a final dividend of 5c a share, lower than the average dividend paid over the last 16 years.
