Alliance Group posts 'disappointing financial result'
"It reflects the tough global trading conditions especially for lamb, which accounts for a high proportion of our portfolio.”
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The Alliance Group has announced an after-tax loss of $95.8 million for its latest financial year. It follows a $70.1m loss last year.
Although it is forecasting a return to profitability in the current financial year after taking “decisive steps”.
The latest loss includes one-off post-tax costs of $48.2m in relation to restructuring costs and other one-off adjustments.
It included redundancy costs following the closure of the company’s Smithfield plant in Timaru.
It means that Alliance’s underlying financial result is a $47.6m loss after tax.
The Alliance Group has plants throughout the country, including at Lorneville, Invercargill and Mataura in Southland.
Alliance Group chair Mark Wynne said: “This is a disappointing financial result for Alliance and reflects the tough global trading conditions especially for lamb, which accounts for a high proportion of our portfolio.”
“In response, Alliance launched a comprehensive reset designed to lift the performance of the company. We have worked hard to build the company’s financial resilience, significantly reduced costs, rationalised our processing capacity, improved our offering to farmers and invested in technology.
“The decisive steps we have taken means we have now turned a corner on a tough two years. We’re leaner, more agile and ready to ride the upturn in global red meat pricing. We have seen positive signs in the past few months and we are now forecasting a return to profitability in the current financial year.”
The decline in shareholder equity in recent years and the ongoing global market uncertainty meant Alliance had to make the tough but necessary decision to strengthen its balance sheet with capital from farmer-shareholders, Wynne said.
“We understand the burden of asking our farmers to reinvest in difficult circumstances and we pulled every available lever, including reducing inventory, accelerating global market payments, and cutting operational costs, to ease the pressure.”
The company has appointed Craigs Investment Partners to explore external capital-raising options.
“While we are at the very early stages of the process, we’ve seen encouraging interest from both international and domestic parties, but for reasons of commercial sensitivity, we will not comment on specific opportunities.
“We will be assessing any external opportunities based on strategic fit, value and expected benefits for the company and our shareholders before making any decisions. Ultimately, the final decision will rest with our farmer-shareholders.”
Alliance chief executive Willie Wiese said the company worked hard to improve its offering to farmers as part of a programme to rebuild trust and confidence.
“Enhancing the value we deliver to our farmers has been a key focus of our reset this year. We introduced a more equitable livestock pricing schedule, reshaped our loyalty programme and committed over time to bring in a simplified ‘all-in’ processing sheet.”
Global markets remained exceptionally challenging with prices remaining weaker as consumers continued to keep a tight rein on spending in the face of the cost-of-living crisis, Wiese said.
“Sales value and volume to the Chinese market nearly halved this past financial year. While China had been our largest market, we used this opportunity to develop significant commercial alternatives, making solid progress in establishing more stable and consistent markets outside of China.
“Although global markets remain tough, we saw steady demand growth throughout the year, with prices gradually climbing. Beef has been trading strongly above its five-year average price, driven by the drought in the United States. After two years of downward pressure on pricing, lamb now appears to be coming off the bottom of the price cycle.
“Alliance has become a more agile and leaner company, better positioned to capture greater market value and deliver stronger returns to our farmer-shareholders.”
Alliance’s Annual Meeting will be held in Gore on 18 December 2024.