The O'Brien Column: Affco is the exception to well performing 'rural' companies

Friday 22nd June 2001

The reporting time limit for companies with a March 31 annual or half-year balance date expired with the usual mixture of good, indifferent and poor results.

Not surprisingly, companies with a rural connection were among the best performed, with the exception of Auckland-based meat processor Affco, which earned a net profit of $752,000 in the six months to March compared with $7.4 million in the previous corresponding period.

Export prices for most primary products are about 50% higher than the average of 1999/00, as shown in The National Business Review's tables of commodity export prices and overseas product prices. This, combined with a good season and the relatively low dollar, assisted the farming community and the companies that deal with their output.

A total of 18 companies issued results in the week ended June 15 but most reported at their usual time, so the adage that late results are bad results did not apply. Even so, some were unlikely to boost their company's share price.

Fishing company Seafresh NZ was an example of a company reporting an improvement but still recording a loss. The report for the six months showed a loss of $391,275, compared with a loss of more than $1 million in the first half of the previous year, and a 2000 full-year deficit of $2.8 million.

While Seafresh is a small company, some comments in the brief statement accompanying the figures were relevant to changes that occurred in other groups. It said management consolidated the company's position over the past months and made "more effective utilisation" of its smaller resources.

Chairman Peng Lee Lim said, in line with strategies set for the year, "the management has conscientiously reduced risks and maximised returns from favourable opportunities." This could mean anything and the report did not elaborate but it indicated an effort to get rid of the red ink.

Comments about restructuring, reorganising and generally taking up any corporate slack were a feature of several reports.

Appliance retailer Pacific Retail Group, for example, quoted chairman Maurice Kidd as saying the board was pleased with 34.6% profit increase over the year. He was confident the business was now in a sound state as a result of actions undertaken over the period - but there were still "a number of key initiatives yet to be fully implemented."

Wrightson Group seemed to couple the much-improved conditions in the rural sector with earlier reorganisation. It issued a brief report for the nine months ended March when profit was $19.4 million compared with $9.5 million for the same period last year. The significant improvement was said to reflect a strong performance across the company's New Zealand businesses.

While the nine-month report does not usually do more than give a bare profit result, Wrightson's earlier half-year report said the company had made progress on various initiatives "that reflect both its traditional strengths, as well as its solution strategy."

That was effectively a progress report on steps taken to sort out the company after the debacle of a few years ago, when it seemed farmer clients were seen as economic units to be managed rather being than the basis of a rural services company, requiring one-on-one relationships with the company's staff.

Several technology and e-commerce companies reported for the first time. Some came under the new capital market (NCM) category and there were also reports from non-tech companies in the NCM area. It was too early to assess their medium to long-term prospects but it was worth noting the common situation where losses, or small profits, were better than forecasts made at the time of floating.

The Caci Group, produced a typical report. For the six months to March it showed a loss of $233,000 while it sorted out the required "key transaction" but said the group was on target to meet its budgeted revenue and profit for the year ended March, 2002.

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