Board takes the helm at troubled meat company

Friday 30th March 2001

SAM LEWIS: Chairman not talking about executives' flight

Affco's four top executives have followed CEO Ross Townshend out the door reports CHRIS HUTCHING

Affco's board of directors met yesterday to grapple with a wave of executive defections from the troubled meat processor that have caused the share price to sink to 33c from a high of 46c last November.

The share price was already declining in the lead-up to the annual meeting before Christmas which revealed a picture of a company ruptured by industrial strife and supply problems that made it impossible for executives to deliver dividends in spite of some of the best market conditions for decades.

On Wednesday the directors received a resignation notice from Peter Wethey, general manager business development.

He followed the Monday departures of operations group general manager David Hall, and sales and marketing chief executive Tony Johnston.

They were the latest resignations after chief financial officer Graham List left and former chief executive Ross Townshend resigned on February 26.

Charged by Affco's bankers to sort things out, the directors have been cutting budgets and rewriting the strategic direction of the company - all to be announced to the market in a couple of weeks.

Directors are particularly miffed at the diminishing prospect of a shareholder payout after having recently signaled that an interim dividend was on the cards.

"What you're seeing I guess is some executives being given some choices.

"Some are working on finalising international projects and will be here for two months or so while the company is reassessing the emphasis of the strategic plan," an inside source said.

Executive chairman Sam Lewis declined to comment.

A spokesman said that since Mr Townshend's resignation from his $850,000 job, Affco had taken the opportunity to review costs and Messrs Hall and Johnston "have decided this scenario was not appropriate for them and have given notice of their intention to resign from the company."

They are working out their notice and new internal appointments are being finalised.

The company describes Mr Townshend as a "change manager" who joined Affco in 1998 and had largely completed his task of seeing the company through a particularly tough period in which restructuring had taken Affco from loss to profitability and a doubling of its share price.

But despite Mr Townshend's restructuring Affco's bankers were unimpressed with the recent profit result that was swelled by asset sales and revaluations.

The strategic plan being re-written by Affco's board will emphasise closer alignment to other meat companies and may fuel more rumours about mergers or joint ventures with Richmond and South Island-based Alliance Group.

Affco already has close links with Alliance in international marketing and one of its main shareholders has links with Richmond.

The kind of problem facing Mr Townshend's successor was pointed out last week when executive search consultant John Peebles said the common term of executive employment contracts has fallen from eight years to about three.

"One thing I can say is that in my entire time in this job I've never seen a board of directors sack itself for failure to turn a company around. In fact, it's possible to point to certain companies where multiple numbers of people drop out of the system and it just may not be possible to achieve a certain commercial objective for lots of reasons," Mr Peebles told NBR.

There were concerns Affco's Easter trade in chilled lamb might have been affected by the recent vets' strike.

The effects will only become clear in the next interim accounts but may be offset to a degree by higher prices from European buyers than is usual for this time of year.

Mr Townshend told shareholders at the December annual meeting that overseas customers wanted to deal with fewer suppliers all-year-round and that was why the company was sourcing product from other countries, including Australia and Argentina, and it expected that strategy to start delivering this year.

But just last week Affco said it was considering temporarily closing its operation in Argentina because it feared its name could be tarnished by the foot-and-mouth disease outbreak in that country.

Other international marketing initiatives recently undertaken by Affco include exporting beef to Russia from a $20 million Chinese joint- venture processing plant it opened a year ago.

Comments from our readers

No comments yet