Furrowed brows at Affco

By Phil Boeyen, ShareChat Business News Editor

Friday 20th April 2001

Meat processor Affco (NZSE: AFF) is blaming a variety of factors, including the weather, as it warns of lower than expected profits for the first half of its financial year.

The company says while the interim result will be positive it will be substantially below last year's $7.5 million.

Reasons for the profit downgrade include the US beef quota issue, which is estimated to have cost the company half a million dollars.

Affco says the MAF veterinarians strike has cost another $3.5 million and a wet summer produced lower than expected stock numbers.

The company is also taking a look at the potential for its full year result as livestock numbers prove lower than anticipated by industry economic forecasts.

"While total revenues for the half-year will be down on expectations, Affco believes the comprehensive internal review of costs, structures and activities currently being undertaken will impact positively in the second half to bring the company closer to best practice in the meat industry," it says in a statement.

Many investors had been banking on Affco being able to improve its financial position by taking advantage of animal health concerns in European markets.

However the company has been buffeted by a number of ill winds, not the least the surprise departure earlier this year of its CEO, Ross Townshend.

Several other executives have also left the company, leaving executive chairman Sam Lewis in the hot seat.

The latest profit warning is a far cry from a bullish statement by Mr Lewis last December when the company released its full year profit of $15 million.

In announcing the result Mr Lewis said it was "a sure sign that Affco has turned the corner and is now heading for sustainable profits and continued growth through the company's internationalisation programme focused on demand led planning."

Affco shares have fallen from a high of 42 cents in February to trade this morning at 32 cents.

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