Silver Fern predicts more cost savings from Wrightson deal

Friday 4th July 2008

Silver Fern Farms, the meat cooperative formerly known as PPCS, predicts savings in funding costs of about NZ$16 million a year from PGG Wrightson's plan to acquire half the company's stock.

Silver Fern said the savings would be in addition to some NZ$60 million short-term annual gains already assessed to come from the transaction.

It said total borrowings, excluding any prospective benefits from the Wrightson deal, would fall to NZ$230 million in the year ending August 31 from NZ$330 million a year earlier. The company's gross margin would widen to 20% from 14% and the return on equity would revive to 10% from -18% in the previous year.

Funds from Wrightson would be used to pay down debt and provide working capital, Silver Fern said in a statement today.

A heads of agreement to create an integrated supply chain company needs approval from the 9,000 farmer suppliers that own Silver Fern. The cooperative structure would be retained and the rights of suppliers protected under the constitution, the two companies said on June 30.

PPCS has closed plants to cut costs this year. A plan to merge with rival meat processor Alliance Group faltered last September.

Shares of Wrightson were unchanged at NZ$2.55.

By Jonathan Underhill

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