Silver Fern Farms media release on $34.5m dividend. Click here to view announcement.
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Silver Fern Farms media release on $34.5m dividend. Click here to view announcement.
Must be about time for a result? Think its going to be (relatively) good????
Have seen a lot of sponsered social media advertising from Silver Fern of late particularly on instagram.
Yep! No word on divvies for the co-op
https://www.stuff.co.nz/business/far...chinese-demand
Pretty easy to see how much it costs to run the coop. Not cheap!
Yes a strong result.
Positive
https://www.usx.co.nz/uploads/paperc...pdf?1586919432
Did I read no dividend from SFF to the two shareholders - Co-op & Shanghai ?
The result is quite telling on what may have been possible even with Farmers stumping proportionately more cash to retain
more control of SFF IMO, rather than quazi 50/50 if I remember correctly & China having casting vote..
The two shareholders Silver Fern Farms Co-Op and Shanghai Maling, asked Silver Fern Farms Ltd not to pay the dividend.
Perhaps we will receive further advice on the divie and a trading update at the agm on the 30th April.
Smart (or large) money not wanting to impact their balance sheets by paying out dividends to shareholders in uncertain times, just wait until this escalates across the wider NZX bourse. End up with a truck load of investments returning nothing in cash, it will be a watershed moment and reflection on where returns are literally coming from, instead of waiting/holding companies that have no capacity to return earnings to investors.
I think we've already have seen this starting with a bundle of the March/April Div paying NZX companies.. undoubtedly more to follow soon or slash payouts between now & the Sept/Oct round of Div payouts too..
Likely to bring sobering reality back to those on where they sunk their NZX investment cash in places
With SF Co-op, farmer shareholders on the receiving end of this may or may not seen too much dividend return in the preceding 12 months either
Update from SFF today says they are considering a dividend
Silver Fern Farms Co-operative and Shanghai Maling
have made the decision and requested Silver Fern
Farms Limited defer the dividend payment until
the outlook for the global operating environment
becomes clearer. As we come through the current
crisis and enter a ‘new normal’ Silver Fern Farms
Limited’s Board will gain more clarity around timing
payment of the dividend.
Above from their annual report.17th April
https://usx.co.nz/uploads/paperclip/...pdf?1587091395
Certainly 2020 started out a much tougher this year - China effectively closed down for shipments through February, which is the peak of the production season. Lack of consumption through being closed through CNY and prices coming off the peak at the end of last year (but still at historically high levels). Now with distancing rules, plants are still operating under essential, but only at 30-50% because people can't stand in their normal place - cost of production would be relatively horrendous (and seeing schedules decrease despite better currency).
Europe and the US in lockdown, and their foodservice sectors are dead for the time being. Scramble for more into retail - but some cuts are unsuitable for retail.
I would fully expected after the start of the year that with their result they would have been as conservative as able.
2020 would be a record profit and plenty of tail winds - but can understand not paying a divvy until the Covid dust has settled. Alliance (their main competitor and next biggest company) only made about $9m net (YE 30/9). They'd be shuddering at a cashed up SFF, and ANZCO are coming off a couple of poor seasons/results.
It is clear though that SFF is a beef story and a China story. Alliance don't have a big beef share, so would be interesting to see what ANZCO (Japanese owned) and AFFCO (Talley-ban owned) make - as they are the next biggest beef processors.
Still, with the Co-Op, circa $100m shares on issue, makes $34m net = 0.34c per share. PE of about 1.6 at todays price. Historic performance counts against them, but could be worth a punt and not many (listed) vehicles in the sector. Just not sure on the policies and difference in treatment between being a supplying shareholder, and an ordinary shareholder....
More supply disruptions
https://finance.yahoo.com/news/meat-...181155792.html
Pity most plants have been at 30-50% capacity through Level 4. Should return to more normal production levels this week.
Still, would be giving the opportunity to ship hard and move stocks - but realistically 4-5 weeks transit.
Great for manufacturing beef. But the lack of hospitality/restaurant trade problem for the higher-value cuts.
SFF don't process pork but.....what a shambles
""There are 700,000 pigs across the nation that cannot be processed each week and must be humanely euthanized," said the April 27 letter."
"Even as livestock and crop prices plummet, prices for meat and eggs at grocery stores are up. The average retail price of eggs was up nearly 40% for the week ended April 18, compared to a year earlier, according to Nielsen data. Average retail fresh chicken prices were up 5.4%, while beef was up 5.8% and pork up 6.6%."
https://finance.yahoo.com/news/pigle...214016462.html
The comments are enlightening too,sad
Some realism
"This is a classic example of the media taking advantage of the ignorance of others to instill fear and panic. Hitler and Stalin did this too. But I'll teach you so you will know what happens and why it happens."
"Thats all it means, it DOESN"T mean we are going to run out of food. There are thousands of food processing plants in this nation and in order for us to have a food shortage over half of them would have to go down at once. The thought of that happening is ridiculous.
The real motivation here is the media wants to instill as much fear and insecurity because its a election year and they hate the President."
But the supply chains are chaotic & the prices are going up
And this one !!!Sound familiar?
"The President should step in and order the slaughterhouses to reopen with government assistance as essential industries. The owners appear to be taking the easy way out, figuring on bail-out money either way, and need to be reoriented."
Large proportion of US meat goes into food service (moreso than NZL), poultry/pigs have faster growth cycle so operates on more of a 'just in time' supply chain. Prices are up to wack as difficult to understand 'real' supply/demand curve. Will have impact on SFF with lower returns on processing beef sales to the US, unsure the impact of some of the premium lines they are looking to launch there.
Just having a look at these. They sure look good value. Looking at online news beef and lamb prices overall are off their highs but still at historically strong levels. Wondering about the effect of lockdowns and social distancing on sales of higher margin (presumably) cuts supplied to restaurants. I'm also wondering how this type of co-operative structure is generally assessed in valuations. Any comments would be much appreciated.
So where do the Chinese shareholders fit in?
Media release out this afternoon following a board meeting of the operating company.
It is pleasing to hear that they have performed strongly, managed to deliver to customers and maintained all staff, through COVID so far. It is a clear signal of confidence that they have decided to release the deferred dividend to their shareholders, allowing SFF to pay out a 5.4c dividend to ordinary SH.
I have to say I am surprised how much cash buffer the Co-op has decided to retain but 8.3% fully imputed dividend is pretty good in today's environment and the PE is still well under 2.
A pretty sound investment in my view.
Discl: Have been buying up quite a bit in the last few months
https://www.usx.co.nz/uploads/paperc...pdf?1595478544
A great result & reward for both sets of shareholders
The key point for me (aside from the divvy :p) was in some of the communication yesterday that they said they had had a strong financial start to 2020 - which will be the busier part of the year and through Covid. Retained $45m of FY19 profit in the business.
Disc: Holder
Exactly my view too. They have stated clearly that 2020 has started well, they repaid the wage subsidy in full, kept all staff, paid out a healthy dividend AND kept a lot of cash in both the operating company and more surprisingly, in the listed Co-op as well.
Certainly gives me great confidence for good future dividends as well.
With Percy onboard, we could even say we are well positioned.
"All ordinary and rebate shareholders at the record date of 31st July 2020 will receive a fully imputed
dividend of 5.4 cents per share."
"A fully imputed Patronage Reward of 6.0 cents per share is payable on qualifying shares to supplying
shareholders based on supply during 2019. Both payments will be made on 14 August 2020."
We have record date and payment date but not ex dividend date.
Any one buying SFF shares over the next few days, need advice from their broker, that they are buying "cum div".
You are right Percy. This seems odd and needs to be clarified. Anyone buying for the upcoming fat divie should definitely be aware of this.
I have had a confirmation from SFF's "Shareholder Relationship Manager" that shares held at close of business on 31 July will receive the dividend but seems difficult to get an XD for the USX.
Sold to the Talley-ban.
https://farmersweekly.co.nz/section/...ets-new-growth
Plant building themselves are old. But would also have various resource/water/discharge consents that the Talley's will be keen on.
Yes, Talleys slowly becomes more of an empire - even coal mines to help supply energy for their plants. If SFF had a good profit, and ANZCO did OK, then bet AFFCO had a good year last year also.
From Silver Fern Farms Ltd latest set of accounts as per NZ Companies office.Note 11 is of interest to us.[Land value $18.13mil]
11. Current assets - non-current assets classified as held for sale
2019 2018
$'000 $'000
Land 18,130 -
Buildings - -
Plant and equipment - -
Total 18,130 -
Following the Group's announcement to close the pelt house at Fairton in August 2019, the Group plans to sell the farm
and processing plant at Fairton and has initiated an active programme to identify a buyer and complete the sale. The sale
is expected to be completed within the next 12 months.
Buildings, plant and equipment at Fairton have been classified as held for sale with a current net book value of nil.
.
Having another memory lapse,!..Can't find where I read it,
Thought I read they were spending $17mil upgrading their beef processing plant in The Hawke's Bay.
If so the Fairton sale will either cover this cost, or go a long way to..
Found it.................
https://www.google.co.nz/url?sa=t&rc...Su8Q6b7Vim1Nfu
While they don't release details by segment, beef would be responsible for a big chunk of their profit - so not surprised if spending some coin. There will be a bit of catch-up in terms of under-investment in plants in previous years when some lean years.
Puts them in a great cash position after retaining most of last years profits.
Very interesting reading and numbers and very good for NZ Inc.
The numbers that surprise me the most from this are the strong numbers from USA & UK in June. But great to see this industry doing well. We need primary industries to do well to pull NZ out of the economic hole we're in right now
Much of that pricing was the tailwind that helped SFF last FY - African Swine Fever certainly had an impact, and historically 'disease' or something similar only provides a short-term boost and can create a hangover later (ie FMD, BSE etc). Companies swing into 1 market to follow the bucks and be competitive and ignore other markets etc etc etc.....
The other aspect would have been the dip in the dollar through Covid, when it got down to circa 0.56 USD. Money in the bank, especially when schedules were more reflective of Covid/feed, rather than currency/markets.
From what I understand, most markets going 'OK', China is OK without the price peaks from some months ago, but foodservice in various markets is battling - so high-end cuts like lamb French racks, prime beef cuts etc are difficult. Heard that some of the US retail is phenomenal.
Local supermarket last night - premium beef mince $18.99/Kg, beef tenderloin $24.99/Kg! :confused:
And PakNsave $19.99 for vaccum packed eye fillet from Greenlea ???
Okay... so my friends have been highlighting this one as a possible investment and at first glance the shares look stupidly cheap BUT meat processors have a truly shocking, actually notoriously shocking track record of massive swings in profitability (and I am still very time poor this week), so what I will do is pose some devil's advocate questions and seek feedback.
Co-op structure leads to an ill defined dividend policy.
What exactly is their policy in terms of payout's for patronage reward v dividends ?
Last year they paid a 3 cent patronage reward but no dividend ? Why were suppliers favored over shareholders ?
What evidence is there to suggest this is anything other than a pure cyclical stock ?
Normal PE valuation methods appear flawed in that there appears to be no set methodology for distribution of profits and a share is ultimately only ever worth the net present value of what it can pay you in dividends over its lifetime so a dividend yield valuation model seems most appropriate to me.
Assuming for a moment this is a pure cyclical company and looking at their dividend history over the last 3 years they have paid 2.8 cents, 0 cents and 5.4 cents, total 8.2 cents = average 2.73 cents. Grossing this up for imputation credits gives gross average payments of 3.79 cents per share per annum. If I expect a 7% gross return from a no growth cyclical company an average annual return of 3.79 cents suggests the shares to me are worth 3.79 / 0.07 = 54 cents.
I invite a full rebuttal from those invested as to why their investment thesis is different and a higher valuation is warranted and look forward to reading people's responses.
https://usx.co.nz/uploads/paperclip/...pdf?1586919432
https://usx.co.nz/uploads/paperclip/...pdf?1587091395
https://usx.co.nz/uploads/paperclip/...pdf?1595478544
So Silver Fern CoOp owns 50% of Silver Fern Farms Ltd.The other 50%owner is Chinese Shanghai Maling.
The CoOp's earnings are equity accounted.
SFF [Unlisted].
100,378,874 shares on issue at 65.1 cents gives a market cap of $65,346,647
eps 34.78 cps
PE..1.872 yes one point eight seven two....Note PE ratio is under 2 [two].
Net dividend per share 5.4 cps [in the bank this Friday]
Net dividend yield is 8.29% over 12 % gross.[ie fully imputed].
Equity ratio 81.93%
ROE 12.2%.This is based on their Total Equity of $304 mil.
Dividend policy of SFF Ltd.Minimum 30% of NPAT with target of 50% NPAT split 50/50 between CoOp and Shanghai Maling.
Note the latest payment was 37.5%.
I believe there is a strong future for "New Zealand grass feed red meats.".
My Valuation...$1.30....[note twice current share price].
Good points Beagle.
As percy has pointed out, the operating company has a clear dividend policy of paying out a minimum of 30% of NPAT to its 2 equal shareholders, SFF (Co-op) and Shanghai Maling.
You are correct that for the FY18 they paid out no dividend, due to a very poor year.
Once SFF receives its dividend from the operating company, its first step is to ascertain any need to cover operating deficits which includes cost of its own Board as well as its representatives on the SFF Ltd Board.
This year they also decided to keep $4.5m to replenish reserves to cover themselves should they not receive divies from SFF Ltd in future years.
Once they decide on a pool to be distributed, the formula they use to decide on a split is that a MINIMUM of 65% should be paid out as dividend and MAXIMUM 35% as Patronage Reward. As I said above, 2018 was an exception due to a low dividend.
Of interest is that SFF Ltd has a clear strategy that it has been implementing for a couple of years now, on where it is going and where it wants to be. There is a strong focus on capital investment to have best practice operation to deliver the "Plate to Pasture" market lead plan. They have clear goals on greenhouse gas emissions reductions and marketing. This focus has resulted in SFF Ltd being in the strongest financial position it has been in for the last 10 years with a goal of $150m aggregated profit over the 5 years period to 2023. It looks clear to me that Shanghai Maling has been a good partner and inserted some strong business focus to the company.
COVID has resulted in more consumer awareness and people now, more than ever, want to know where their food comes from and that it is clean and safe. Grass fed red meat meets that increased awareness perfectly.
Many thanks Percy and Iceman. I really appreciate you sharing your opinions and helpful links both above and by email..
My initial reservations include:-
I find Shanghai Malings effective control over SFF Ltd to be a concern here. They're part of the Bright Dairy group and as major shareholders of Synlait and with representatives on the board I'm on record several times as calling their strategy at Pokeno to not only be extremely risky but also the actions of progressing the building and commissioning of that facility, flying in the face of a high court ruling against them but proceeding to build anyway and risking the combined total of the last 6 years of Synlait's profits on a supreme court outcome...this is gross recklessness in the most extreme way I can recall for many many years.
The jury is out, (almost literally, awaiting a decision by the Supreme court) on whether this is one of the greatest corporate risk management fiasco's of recent years or not. I would have expected them to exert their influence as major shareholders and with directors on the board to manage the risk more proactively.
I assume there are different Chinese executives involved in SFF ltd than Synlait ? Even so I see effective Chinese operational control of SFF Ltd as a real negative most especially in the current extremely hostile, (effectively almost a cold war), geopolitical climate. The risk of corporate malfeasance such as for example transfer pricing at inappropriate prices, (sales of large quantities of products to friendly parties in China at below their true open market export value), has to be considered as being a serious risk here especially in the light of historical razor thin margins in this industry. Do I trust Shanghai Maling to run a clean and honest operation ?...that is the $64,000 question.
I have an elephants memory for deals where Kiwi shareholders have been treated very badly by Chinese controlling interests so I will tread very, very carefully and slowly looking further into this one.
http://www.silverfernfarms.co.uk/ass...6-2015-web.pdf
Pages 25 and 26 sets out the safe guards of the Shanghai Maling casting vote.
Look more than satisfactory to me.
Page 26 of what percy ? Your link is to a 2 pages media release
I found it I found it.
Was not where i expected it.....
Long story but I found it.
Try it again....it really works..
Thank you Wilkipedia.......lol.http://www.silverfernfarms.co.uk/ass...6-2015-web.pdf
Thanks percy. I agree. This looks satisfactory.
Like Mr B have had similar results in business dealings with PRC & wary of businesses tying up with a Chinese partner
But in SFF case the partnership has been a win win for both parties & has been good for SFF NZ shareholders
Not directly but most of China's corn and soy is used to feed chickens and especially pigs which were decimated last year by swine flu and are only just recovering. NZ meat exporters have done well as replacement protein and can expect to continue to do so.
Above posted by Jaa on Chinese/NZ trade relationship thread.
In terms of history, Beagle is correct - the meat industry does have a notorious shocking track record. Plenty of train wrecks and particularly corporate investments I think were almost always a disaster - Fletchers, Brierleys, PGW etc. Very much a checked history.
But at the same time, people definitely do make money out of the meat industry - just a few years ago Craig Hickson was EY Entrepreneur of the Year (ok so was Peter Harris but we'll gloss over that). There are plenty of smaller companies who make money, and of course Talleys own Affco - and for sure they ain't no mugs. A well-run, disciplined business with decent capitalisation in the meat industry does have profitability.
I think one of the big differences now is the old business strategy of "screw the opposition" has gone. While the industry is still very competitive, there appears to be less short-termist behaviour to do whatever to hurt competitors. While livestock numbers have been drifting lower, capacity is a whole lot less. SFF at least appear to be less about market share/volume than what they were in the past.
Senior management has basically changed completely in the last few years (and they had a couple that staff would have been pleased to see the back of). New thinking coming in from other industries is important - while balancing with industry experience is important because it is different to alot of other industries - deconstruction/seasonal/fickleness of supply. But at the same time, their debt levels are something completely different to what they were a few years ago - SFF were near enough to bust pre-Chinese buying 50% share, and this situation drove alot of short-term behavior and made them very vulnerable to competitors. They always struggled post buying Richmond in early 2000's - which while the strategy was right, way they did it wasn't and saddled them with alot of debt and drove away NI farmers - ie driving away supply.
I would expect that a large chunk of profit has been made out of beef, particularly in the North Island - and alot from the Chinese market. While SFF have had their lamb business shrink in relative size, they have defended their beef business - and when gets to the peak season, this is where the money can be made. They do a good job with bobby calves, and that helps get cull cows. Have been consistently around 30% of NZ's beef, and that has expanded with dairy, where as lamb & deer has been declining for years.
With SM, I believe different executives on the board to Synlait. Also, they still deal with other customers in China - not as if they only sell to SM. Believe they have to pay the market price, just like anyone else. Last year at CIE, SFF had a separate stand to Bright/SM. However certainly in terms of market access and in particular plant listings for China, no advantage being part-owned by a Chinese SOE - SFF have had plants waiting for quite a few years.
Can understand the supplier rebate share wariness - however the majority of their shareholders are suppliers - and SFF require supply. They are still at some level a Coop - albeit now a quasi-Coop. Farmers can be fickle beasts, and it is a PR/investment in the business. Consistency will help drive supply and shareholding - albeit for most farmers financially it wouldn't make a substantial financial difference.
Looking at their competition, while difficult to compare, fully capitalised they are well placed - especially against the likes of Alliance & ANZCO.
There are still risks and an industry that can be very fickle, based on demand, market access, seasonality, FX, weather etc, and a business that you pay your supplier in 7 days, but at very best you'd get money back in in 30-40 days. Their financial year end is to align with SM, and is nearing peak season - so now in the off-season, their debt would be likely alot less.
Part of it is that the old "one swallow doesn't make a summer" - which the industry is again a little notorious for. But I would fully expect that they were conservative with their stock valuations etc end of FY 2020 (Covid/China), but they've got through lockdown OK, and recently said they'd made a "strong start" to the year - which would be their bigger financial/throughput half of the year.
Percy has covered off the financials - and I think alot of those figures are compelling. Wouldn't bet the farm on them, but in todays market as one of the few investments can make in NZ agriculture, and have to take a long-term view.
Thank you Sideshow Bob for your very good overview of the situation.
Can I ask you this $64,000 question. If someone put a gun to your head so too speak and you had to make a best guess on average earnings per share in the next 5 years what do you see as a reasonably conservative average eps, (knowing this will vary significantly between years) ? Surely any assessment of this stock has to embrace its notoriously cyclical nature ? There's no growth here right ? This is a pure cyclical play ? If so wasn't last year the top of the cycle.
What other reason for the co-op to retain so much of the dividend other than they are worried the current year or next year they won't get much so they want to ensure their operational costs are covered for several years ?
I'm lost at sea here. I don't see any other way to estimate earnings going ahead than to take the average since SM came on board.
What assurance is there that the current year will anything like 2019 ?
What operational / structural / processing matters have been put in place so a repeat of abysmal profitability like 2018 doesn't happen again ?
Sorry for the 101 questions.
I'll have a crack......:eek2:
2019 was a record profit, but in an ordinary year, I'd say $20-40m, 50% share for the Coop, $10-$20m. So earnings of 10-20cps. Looking back over history is not completely applicable now with no long-term debt - which at peak season would blow out. But as a % of turnover, profit margin is typically 1-2% - so it is thin, and certainly vulnerable if some sort of shock or unforeseen event.
Growth from existing operations is difficult. Turnover has grown as a result mainly of prices etc - rather than more volume and have natural constraints with capacity at peak season. Extremely difficult to grow business off-peak. Not sure if any acquisition or similar is on the radar (would highly doubt it), and have pulled back from in-market presence in a number of markets (under previous management). Would largely ignore their retail branded initiatives as won't make a major contribution to the bottom line.
With the dividend, the FY was 31/12 and the dividend was delayed by Covid - and would see that they have paid out a minimal amount - and kept the remainder in the business. A number of companies have cancelled dividends and understand some reinvestment going on in plants/infrastructure - but mostly stuff with return (I think) rather than just things that they need just to keep going. Pre-SM when money was tight, they didn't reinvest into their plants as much as they should of. But with the Coop retaining money, ultimately I think they want that to be self-sustaining financially - not reliant on dividends from SFF Ltd. But in this environment not easy and better to salt some away for a future rainy day and then replenish when they can.
2018 wasn't abysmal profitability in comparison to history......but overall I think have much more discipline in the business, new management at key levels (none from 2015 are still there). Like I said, they aren't driven by volume or procurement share - but seems like if they can't make a dollar from it, why would they process? They shut a number of plants over the years which really costs, but seem to be the right size - and just sold their Fairton site - so more cash.
There is still a number of risks and issues in the macro environment - but certainly not alone in that.
Great post Sideshow Bob.
So eps.at last sale price of 65 cents.
10 cps gives a PE of 6.5
15 cps gives a PE of 4.34
20 cps gives a PE of 3.25
28 cps gives a PE of 2.27.SFF ltd are targeting a 10% ROE.At last year's $571mil it would mean 28cps to the CoOp.
30.75cps gives a PE of 2,11.That is equity of $571 plus retained earnings of $44.1875 total equity $615.18 mil 10%ROE on $61.51 mil equity is eps to CoOp of 30.75 cps.
This year's eps was 34.78 cps......The CoOp held back nearly $5mil rainy day money,and still paid a fully imputed divie of 5.4 cents per share.
So looking at eps from 10 cents to 30.75 cps, they look to have the capacity to pay the same fully imputed divie 5.4cps [8.3% net],or a lot bigger divies in future.
To add a bit of juice.SFF Ltd should receive approx $18mil from the sale of Fairton property.
Lets say they do have another pretty good year,and earn 28 cps.[this year 34.78 cps ]No need to hold back more rainy day money.Divie 8 to 10 cents fully imputed.At a share price of $1.30 net yield would be 6.15% or 7.69%.Double those yields on today's cost price of 65 cents.
Good posts SB and percy and nothing to add except to say that the operating company's goal is for $150m aggregate NPAT for a 5 years period, which makes the average for the Co-op 15c EPS. If the operating company can average that profit, they should pay out dividends at the upper end of the 30-50% range. The current cash balance and the sale of the Fairton property to Talley's (undisclosed price) , makes them well on their way to fund the $17m upgrade in Hawkes Bay.
I am using that 5 year forecast of theirs as a base average over the business cycle. As percy points out, that gives ample room for very juicy dividends, not less than this year. Whichever way we slice this one, fundamentally it is very cheap.
Thanks Sideshow Bob. 1-2% margins makes airlines margins look fat !!
Nice ramp Percy :D
Agree Iceman, looks cheap on paper but needs to be VERY cheap with no growth, wafer thin margins, aging plant and equipment and the genuine prospect, (Ashley Bloomfield thinks this is more likely than not), of another breakout of Covid in the community potentially causing mayhem to processing.
High potential returns and high risk is my initial assessment. Could be okay for a modest portfolio allocation ?...I need to stop asking awkward questions, (thank you for your time and patience guys), and do more reading.
It is interesting to go back to consider late 2015 and when Shanghai Maling bought in. Certainly believe a great job was done by Dean Hamilton, and understand SM's price was massively better (perhaps up to double) that of next best option - at a time when SFF was under financial pressure and banks weren't too happy.
Shanghai Maling paid $261m for a 50% share - at a time when SFF total equity was about $360m.
If you look at the Coop today, which has 100m shares with 50%, they paid $2.61 per share say.
Close on to 5 years on, with the company in a much better place, can buy what SM paid $2.61 for, for only 66c, when the company has total equity of $571m.
As an aside, Chinese entities obviously have deep pockets and have a different investment horizon and other goals. Just need to look at Westland Dairy - different industry but they paid $588m, where by any traditional valuation would be a whole lot less.
In hindsight,had some one a year ago had the foresight to say SFF would pay a fully imputed dive of 5.4 cents per share [8.3% net or over 12%gross], we would have said they were ramping.
The 2018 annual report set out SFF Ltd's objectives.The 2019 annual reports confirms they are meeting those objectives.[Doing as they say they will do]
Both SFF Ltd,and SFF CoOp have very strong balance sheets, little debt in Ltd ,and no debt in the CoOp.On huge revenue, as McDonalds have proven, you do not need large margins to make good profits. The future for "grass feed red meat" is bright ,as more people want to know what they are eating,and where it came from.Again there looks to be a food shortage in China this year,which should under pin the price we sell meat to them at.
On my last day of isolation and being totally bored, I will add a bit of anecdotal evidence. Some of my co-workers are Chinese. We live together for months on end so have some intimate discussions. Over the last few months I have been sounding them out quite hard on where we stand with trade with China compared to other countries and what COVID has meant to them. They tell me what they read (and believe) which is the Chinese state controlled media.
In summary, I could say that they are 100% in support of following rules with isolation and behaviour such as use of masks and social distancing.They want NO EXEMPTIONS from those rules.
We work in fishing, so they are all well aware of quality and production. But it is clear from what they are saying that China is being told to watch out for where their food comes from to make sure it is safe. Their attitudes towards things such as how the animals they eat are fed/treated has changed a lot. TV has shown bad practices of a salmon farm in Norway so now they tell me they no longer buy Norwegian salmon.
Australia is siding with Trump so they don;t want to buy Australian products.
NZ, they tell me, is different. They have nothing but positive things to say about NZ and our produce, particularly our grass fed red meat. SFF has figured this out , as is clear in all their commentary.
This gives me increased confidence in investing in this company/industry.
Hope you get out tomorrow morning and can get back to Nelson to see your family.
More time locked down in Auckland is the last thing you need.
Best wishes mate.
Thanks mate. Been in negotiations with MOH since 5AM and have managed to convince them to let me out a couple of hours early and get a flight at 8AM. All I can do now is keep my fingers crossed to hope this 195 day journey is nearing an end !! Sorry, not related to SFF except I need to get home to spend my juicy divie on Friday :-)
We are all thinking of you.Trust you get home today.
Thanks guys. Sure is great to return to sunny Nelson. What a beautiful country we've got :-)
HDD! (Happy Dividend Day)
Cash in the bank.
Thanks for the link.
Appears we are very reliant on the Chinese.
In short, yes - when you see the volume/proportion of NZ's red meat heading to China. Chinese market not so strong for the higher-end cuts - ie lamb French racks, beef steaking cuts - but the lower-end, offals etc is where it is at.
Money has been substantially better in China than other markets for many of these products - especially the likes of lamb flaps & forequarters. If they have to head back into the Middle East in a major way, or the like, then prices will be substantially lower.
We don't need a market access issue into China (Winston).
Non-issue. Almost all of the lamb plants in NZ are halal these days, and produce halal as standard. Not really any real cost to do so, and will then certify as halal as/when they need to.
Many customers/markets outside of the Middle East require halal, in the likes of Germany, UK, US etc to service sectors of their market that may require it.
Beef not quite so many plants are halal, but ME isn't such a big beef market.
Good to see. I particularly like the below para from the announcement and think this will/is increasingly the case right around the World with COVID-19 having pushed this to the forefront of many people's minds when selecting their food:
“Our US target consumer, the ‘Conscious Foodie’, values the grass-fed and pasture-raised
attributes of New Zealand animals, as well as our sustainable production methods, safe and
thoughtful packaging, and the bold full-bodied flavour of Angus Beef,”
From The Herald:
https://www.nzherald.co.nz/business/...ectid=12360750
Picked up from Zespri latest newsletter:
After nearly a decade with Zespri, Chief Grower and Alliances Officer Dave Courtney will be leaving ourorganisation in December to take on a new role as Chief Customer Officer for Silver Fern Farms.
Looks like their current guy quietly slipped out of the building after not too long??
Also another ex Zespri, so would have worked with the CEO.
Across the whole year to August, against the backdrop of a global pandemic and the US-China trade war, all exports have grown by 2.8%, with milk power, butter and cheese exports up 11.1%, meat exports up 9.9%, wine exports up 8.5%, fruit exports up 8.4% and vegetables exports up 6.3%.
Content Sourced from scoop.co.nz
I expect SFF lead the way in meat exports.
SFF boardmeeting confirms to farmer suppliers that the business continues to track ahead of budget so far in this unprecedented year and pleasingly, a large number of new and current supplier shareholders wanting to become "fully shared. Great to see the farmers vote of confidence in SFF. All pointing to a good year for SFF.
SFF newsletter:
"It is very pleasing to see a high level of interest in both existing and new shareholders enquiring about becoming fully shared. The value proposition shareholders can receive by becoming fully shared is becoming increasingly compelling as we build a track record of delivering consistent financial returns via dividend and patronage reward. Couple this with a commitment from both the Cooperative and Silver Fern Farms to deliver loyal, fully shared suppliers priority access to space and programmes which we believe, although not always perfect, is being delivered in a manner that is transparent and benefits both the Co-op and the operations of our 50% investment, Silver Fern Farms Limited
Simon Limmer updated the Board with a comprehensive view on markets, supply dynamics and the operations within the business. The business continues to track above budget in what has been an extremely challenging year, a real credit to the 7000 staff throughout the business.
As we know in this industry, the next couple of months are always interesting as we balance growth rates with climatic conditions, so I encourage you to plan ahead and have those conversations with your Livestock Rep so planning can be optimised to deliver the best results both for you and the company."