Alliance aiming for ‘greater value’ as part of evolution

The Alliance Group plant at Pukeuri, north of Oamaru. PHOTO: SUPPLIED
The Alliance Group plant at Pukeuri, north of Oamaru. PHOTO: SUPPLIED
Southland-based  farmer co-operative Alliance Group wants to capture "greater value" from its products as part of its evolution to a food and solutions business, chairman Murray Taggart says.

Last month, Alliance Group announced a profit of $20.7million before distributions and tax, on revenue of $1.7billion.

It has now paid $9million to its supplying shareholders.

Mr Taggart said it was the best trading result since 2010.

"While this year’s result enabled us to reward shareholders with a profit distribution, we recognise the need to lift the profitability further.

"Our goal is to build a more robust business with consistently higher profit margins to ensure we can maximise in-market value capture and take advantage of new manufacturing technologies to deliver even better returns to our farmer shareholders."

The past season had been characterised by generally favourable farming conditions across the country, although severe storms during lambing in Hawke’s Bay and serious drought in Tasman made for a more challenging season in those regions.

"Strong livestock prices helped cushion the on-farm financial impact of these challenges and Alliance’s store stock scheme also enabled timely destocking for Tasman farmers."

Highlights of the year had included the opening of a new venison plant and upgrades at both the Dannevirke and Smithfield plants, Mr Taggart said.

"This lift in capacity comes on top of the introduction of night shift lamb and beef at our Levin plant as the company responds to strong support from North Island farmers."

The co-operative’s new venison plant — located at Lorneville near Invercargill — had delivered ‘‘significant savings’’ in terms of overhead costs.

"Venison is a key species for Alliance and with our Lorneville and Smithfield plants, we now have the most modern venison processing facilities in the industry."

Alliance chief executive David Surveyor said the company was on track to capture greater market value and pass those gains on to farmers.

"A visible example of this change was our purchase of 50% of the Meateor pet food business. This investment enables us to capture value from the next stage of processing in the pet food industry and supply directly into the large global pet food players."

The company’s UK food service business had also achieved significant growth.

"We are expanding our food service programme in North America, Asia and New Zealand. The Te Mana Lamb and Silere Alpine Origin Merino lamb programmes have confirmed our ability to differentiate our product and capture a premium from the market. We are now looking to expand the premium lamb brand opportunity across our supply base."

The company had improved its performance in the beef market, but there was still more to do in this area, he said.

"All three beef plants achieved record processing and our beef market share was up. Our beef performance has historically been a frustration for farmers and the company, but a determined focus on improvement at all levels of the supply chain has seen the profitability of our beef operation improve significantly at the same time as delivering a more competitive offer to farmers."

The global markets had faced significant uncertainty over the past 12 months, the US-China trade war having significantly disrupted trade in co-products such as wool and pelts, Mr Surveyor said.

Commenting on international markets, Mr Surveyor said African swine fever had devastated the Chinese pig herd and herds in other affected countries throughout the region.

"The resulting protein shortage is supporting both sheep meat and beef returns."

Looking to the future, the co-operative had a full pipeline of opportunities to further improve the performance of the business, he said.

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