Silver Fern posts $70.7m net profit on back of Chinese demand

Silver Fern Farms posted a net profit of $70.7 million for the year to December 2019, up from $5.8 million the year before on the back of higher red meat exports into China.

The company, jointly owned by China's Shanghai Maling Aquarius Limited and farmer-owned Silver Fern Farms Co-operative, reported revenue of $2.6 billion for the year, up from up from $2.4 billion in 2018.

Heightened exports reflected the impact of African swine fever on Chinese pork supply.

Silver Fern Farms Cooperative chair Richard Young described the performance as the "strongest financial result in the past decade."

Chief executive Simon Limmer said the strong result was positive, given the new operating environment Covid-19 has created.

"While global market conditions and domestic challenges move by the day in 2020, our achievements in 2019 set us up well to meet today's challenges."

The result saw shareholder equity increase by $70 million to $571 million.

Capital expenditure in the period was $32 million, up $3 million on the prior year.

Limmer said while the company had come into the year facing an "uncertain international geo-political and trade environment", the impact of African swine fever had served to counter the downsides of Brexit and US-China trade issues.

"Through all of these dynamic shifts and turns in the markets, we have needed to remain strongly customer-focused and agile in order to take advantage of the opportunities they present."

He said the sales and marketing and operational teams did an exceptional job in managing a changing market mix, and increasing market penetration in markets such as China.

The cooperative's share of earnings was $35.4 million, well up on the $2.9 million recorded for the prior financial year, with total equity up $35 million to $304 million versus $269 million in 2018.

Young said the cooperative was in a strong position with no debt.

"Whilst this was achieved last year, we now have a strong platform to weather a period where our country and the world is in a period of significant economic uncertainty."

He said that since balance date, Covid-19 had fundamentally changed the market.

Within that dynamic, liquidity and cash flow management would continue to be critical in terms of its relationships with all stakeholders.

To ensure cash flow flexibility during this time, Young said the shareholders had made the decision to defer the dividend payment "until the outlook for the global operating environment became clearer.

"As we come through the current crisis and enter a 'new normal' Silver Fern Farms Limited board will gain more clarity around business impacts, thus determining dividend payment options."

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