Silver Ferm Farms

[Sideshow Bob]

From one record year to another......

Not sure if a record bad result. Maybe worst since the 90's and Waitaki days? Certainly they were saying prior that worst since 2012 but that was 'only' about $50m loss.

Alliance are in a tricky position. Markets aren't improving, especially for lamb which is their major volume, and now their debt has cranked up by another $60m and so will their interest costs. Last year interest costs were up $11m, and no doubt banks will start to get a little jittery.

What will be the reaction of their farmer suppliers? No doubt their competitors will be circling (although who wants more lamb currently?)

It has been a tough year for all - but not all companies have lost money. But is a reminder of what relatively slim margins these guys operate on. SFF's record year last year was 5.78% net profit, which is a historic exception. 2021 was 3.77% and 2020 was 2.6%. So don't need the wind to change much to have a material change.

Rising markets have increased these guys revenues so much. This year Alliance's revenues were down $207m. SFF 2022 revenue was $777m more than 2020, and $524m more than 2021. I think this has potentially covered the rising costs these guys are incurring in their businesses, through Covid, inflation, growth in overhead etc.

The limited public info on various companies is frustrating, but is what it is. Now have to wait for SFF. Certainly a year-end of 30/9 is the low point in Alliance's seasonal activity, so their stock/debtors/cash looks as good as possible. End of December the season is starting to ramp up by some degree.

Going to be an interesting SFF report. Especially in the South, a decent result will put real additional pressure on Alliance.

[Sideshow Bob]

David Surveyor obviously timed his exit stage left perfectly on the back of a record (good) year.

I see Select Harvests aren't going that well either. For the HY to 31/3 they lost $96m AUD - although he'd hardly got his feet under the desk by then.

Must be going to report again fairly soon for the full year......

[Sideshow Bob]

Alliance back to profit.....(paywalled).

Foresee slimmer margins and no inventory write-downs like last year.

https://businessdesk.co.nz/article/f...344b-402467359

[nztx]

Alliance back to profit.....(paywalled).

Foresee slimmer margins and no inventory write-downs like last year.

https://businessdesk.co.nz/article/f...344b-402467359

"absolutely believes ... will .. headwinds .."

nice words, but there's a 50% increase in Interest bearing debt put on the Tab for 2023
adventures, which will probably be having to be repaid first & usary cost spat out with no
further calamities needed in the ensuing year of forecast head winds ..

Is he talking it up in time for a CR - perhaps to retain some of the Cockies hard-earned before times up ?

or would that cause wider bouts of indigestion to the already suffering ?

[winner69]

From Farmers Weekly interesting report

My mate Cameron Bagrie says …

There are risks this gets worse for numerous reasons. Firstly trade in security is now a key theme for food, energy and technology. Second, populism is driving a lot of policy. Third, globalization is facing a backlash. Fourth, inflation is wrecking havoc across countries..




Global ag subsidies off the charts
https://www.farmersweekly.co.nz/mark...ff-the-charts/

[Sideshow Bob]

https://www.farmersweekly.co.nz/mark...rther-to-fall/

Interesting times.

$70m into plants. Is that going to produce a return or just to keep them going??

11/12ths of the way through the year and no guidance (no real difference to any other year, except last year with a surprise divvy).

They had inventory of $276m at the end of last FY, so based on the Alliance result would have to expect a chunk of that lamb value is written off, as well as probably paying too much through the year.

However I looked at the SFF market report from the end of September and the price graphs, and much of the drop in markets was between October & December last year, so hopefully are in a better place than Alliance if their inventory values were aligned to market values as at 31/12.

Screenshot 2023-11-28 134511.jpg

Have to pontificate and speculation in the meantime, but when the tide goes out, we see who is swimming naked.......

[nztx]

https://www.farmersweekly.co.nz/mark...rther-to-fall/

Interesting times.

$70m into plants. Is that going to produce a return or just to keep them going??

11/12ths of the way through the year and no guidance (no real difference to any other year, except last year with a surprise divvy).

They had inventory of $276m at the end of last FY, so based on the Alliance result would have to expect a chunk of that lamb value is written off, as well as probably paying too much through the year.

However I looked at the SFF market report from the end of September and the price graphs, and much of the drop in markets was between October & December last year, so hopefully are in a better place than Alliance if their inventory values were aligned to market values as at 31/12.

Screenshot 2023-11-28 134511.jpg

Have to pontificate and speculation in the meantime, but when the tide goes out, we see who is swimming naked.......

Good post .. any guesses on whether the Life Boats will be put on alert & who will be doing the honours ?

[Sideshow Bob]

I think others shouldn't need the life boats, and would have to think being more beef centric, then ANZCO & SFF are better placed to post a better result given this and timing on the lamb market downturn vs FY end.

Here is an interesting article:

https://www.farmersweekly.co.nz/opin...ave-questions/

Pretty upbeat from the chairman of a company that's just lost the thick end of $100m (although I suppose he has to be).

This was an interesting comment:

He also looked rather wistfully at the timing effect of the September year end compared to the competitors’ financial year coinciding with the calendar year, enabling them to report the downturn in the last quarter of an otherwise very profitable financial year

AGL's FY is timed for the lowest point of their seasonal activity, when operations is at a low ebb, stocks are usually pretty low, and maximum cash is back in the bank. So typically it has made it look as good as possible?? They've had the same market conditions as everyone else?? By that thought process, then they should have performed even better last year??

I think Allan Barbers questions are very pertinent......

While conditions are much tougher this year, and no doubt SFF result won't be anywhere near last year, I'm a little more positive than what I had been - as much of the downturn in market values should be accounted for.

[nztx]

The Aussie sheepmeat market glut is reported as being expected to continue into 2023/24 - probably a major
factor in the way our own sector is faring in global markets, keeping the lid on performance in foreign markets
where Auz is one of our competitors..

[percy]

From Silver Fern Farms CEO's latest fortnight report.

Beef


Little has changed in any market, with volumes continuing to shift but at lower prices.



Tropical Cyclone Jasper is moving towards the East Coast of Australia, and while the category 4 system is expected to weaken when it hits land it will likely bring heavy rain, on top of significant rainfall already seen in parts of the country. Australian processing numbers remain high, but more water and greater feed availability could see a pullback in volumes, with procurement prices already lifting and forward bookings not as strong as they were.



For similar reasons the NZ beef kill has been slower to start, however these reduced volumes haven’t really made an impact in global markets that have high product availability.



The US kill continues at high numbers for longer than initially forecast. Consequently there’s no real pressure for domestic processors in the US to chase prices higher, with good availability of imported and domestic production.



In China a broader range of cuts are back in demand, albeit at weaker prices relative to the first half of 2023. Chilled demand remains firm, with increasing weekly chilled shipments as prime volumes have lifted.



In the Middle East, South East Asia and Japan, prices for chilled beef have remained stable. Reliable supply, consistent quality, and a close relationship with our in-market customers have all been important.



Sheepmeats


Markets remain temperamental.



We are experiencing price stability in China for primal cuts though secondary items continue to decline in price. This raises the question of whether the bottom of this market been found, or if is this a temporary reprieve.



Recent reports from South American producers supplying into China advise of a period of sustained pricing followed by further downside with volatility ensuing. Recent rain in Australia and an increase to livestock pricing may also be contributing to this recent price stability.



We are seeing some ‘green shoots’ in Europe now that pricing is at a level where retailers are prepared to once again promote lamb. Retailers have been slow to pass savings on to consumers choosing to bank good margins rather than push through additional volumes, however once one retailer breaks the mould generally the rest follow, and demand increases as a result.



Production toward Easter trade commences as plants start back in the New Year. Demand is down marginally on the previous year however with retailers keen to promote, and pricing at favorable levels, our customers are confident of a successful Easter sales period in 2024.



Mutton markets also appear to have settled for now, with pricing holding; no improvement but no further falls either. The exception is that heavier mutton continues to carry less appeal globally, and options for these carcases continue to reduce along with pricing.



Venison


The venison environment remains stable on price though demand is subdued as is traditionally the case at this time of the season.



EU customers continue to ‘sit out’ as they concentrate on servicing their Game Season trade.



The venison market in China continues to function at normal levels with prices holding for the most part and demand remaining stable across their full range of products. We have had some good recent success expanding on this range and continue to make inroads with regards to increased volumes.



We continue to work with North American processors around their manufacturing requirements for 2024. Interest has been positive and we are looking to continue to build on the good work done here over the previous 12-18 months.