Affco profit plunges

By Phil Boeyen, ShareChat Business News Editor

Friday 9th November 2001

Meat company Affco (NZSE: AFF) is suffering through the pain of a big drop in profitability but appears determined to make good.

For the year ended September the North Island meat processor has posted a profit of $574,000, well down on last year's $15.15 million and even below its interim result of $752,000.

Operating revenues were $1.2 billion, up $209 million on last year, but earnings before interest and taxation fell by half to $11.7 million. No dividend will be paid.

The company admits it's a disappointing result and says it has been a troubled year, with management changes and the adverse effect of a number of external factors, particularly in the first half.

Nevertheless executive chairman, Sam Lewis, says the company is now positioned to be "guardedly optimistic" about the future.

"While the board feels the disappointment of this result as keenly as shareholders, we do take comfort in the knowledge that the company has now thoroughly and realistically addressed its position in a highly competitive and challenging industry."

During the year Affco has closed its US business and sold the Mathias group.

"I believe that Affco has emerged from the 2001 year with a strong focus on cost control, empowering people, efficient plants and a clear strategic direction," says Mr Lewis.

The executive chairman says head office costs have been reduced by $9 million on an annualised basis, and working capital has been improved by $28 million year on year.

"Operationally, Affco is performing at high levels. Processing is at the heart of our business, and the momentum in this area is being reasserted."

The company is also pointing to the 10% share placement made recently to diversified South Island food company, Talley's Group, which it says has given it a significant shareholder with great experience in food processing, marketing and distribution. Talley's increased its stake this week to just under 17%.

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