Forum Archive Index - December 2000

["G Stolwyk" <stolwyk@wave.co.nz>]

 

 

Hi Gerry,

 

I am still trying to find the reasons for the relatively low margin on operations.

It is possible that more about this could appear in the Annual report which we could receive later in Jan.

Their web site < www.affco.co.nz > does not give many clues either.

 

My impression is that the reason could be some or all of the following factors:

1. AFF overestimated the amount of beef to come from NZ.

A large amount of feed available, coupled with a massive rebuilding of herds (after two consecutive droughts), meant that the amount of stock offered, declined.( AFF has already referred to a shortage of stock available).

Hence, AFF could have only partly benefitted from a lower NZ$.   

 

2.The restructuring of AFF took longer than anticipated. The last annual report foreshadowed the transfer of the Omanu cutting operation. Yet, it was only in October that the transfer occurred.

 

The establishment of additional sales offices took place later and these would only now start to contribute: Costs up front, benefits later!  These offices will service the world trade.

 

3.Trading was costlier than envisaged :

They would have had to buy in meat from overseas to service existing contracts in the world.See item (1)

Having bought that meat well ahead of delivery to Europe, they would have felt the chill of the BSE scare in the countries which they supplied. Meat sales in France declined by 60% and some businesses would have closed or required much less beef. At the same time prices fell.

Presumably, some of them would have been forced to rescind their contracts with AFF.

 

Don't be surprised if AFF had to dump some of the meat somewhere else at lower prices!

 

Their Annual meeting will be on Feb. 21. By then, some 4.5 months of trading will have occurred: I am relying on that 2 cents dividend!

I won't be attending but I suggest that if a reader does attend, he/she questions the Board on some of these points in addition to those dealing with current trading.

The future of beef, be it short-medium-or long term, will also have to be aired, I think. Obviously, the status of NZ beef will need to be mentioned as well.

 

As mentioned in my entry of Nov 4, I recommended this stock in Jan. when it was 32 cents. and expected 50-60 cents by now .Unfortunately I did not foresee the massive upheavel to be caused by BSE.

However, much of their machinery is new and there should be some cashflow. I think that one should pay 42-44cents per share till more info. is issued by AFF.      

 

Regards,

 

Gerry