Forum Archive Index - December 2000

[Gerry Tyler-Smith <g.tylersmith@ext.canterbury.ac.nz>]

Hey, Gerry

Your analysis is so thorough and helpful, I have printed it for future
reference.  Thanks.


>        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 




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