Meat companies hit procurement problems

By Phil Boeyen, ShareChat Business News Editor

Tuesday 26th February 2002

Meat companies Affco (NZSE: AFF) and Richmond (NZSE: RHD) are warning that interim profits will be lower than expected due to the wet spring and summer.

Affco executive chairman, Sam Lewis, says the unseasonable weather has encouraged farmers to hold onto stock, and farm gate prices have risen as a result.

"It has been a very competitive environment for stock procurement. We have avoided becoming involved in a procurement price war, and there will be some reflection of this in our trading performance for the period."

"This was a possible negative factor noted in the company's prospectus for its rights issue in November 2001."

Mr Lewis says more normal livestock flows from now to the end of the season, given its late start, should help a return to profitability for the full year, closer to earlier expected levels.

In last November's investment statement the company forecast a full year surplus in fiscal 2002 of $14.1 million on annual sales of $1.127 billion compared to last year's final profit of $600,000 with $1.2 billion in sales.

Richmond boss John Loughlin says his company advised shareholders and the market last December that the first-half will be down on the previous year because of the affects of climatic conditions on sheep and beef suppliers.

"Notwithstanding, we are confident of an overall very good full-year result that will please the market.

"The first-half will be down on the previous year, and the second half will be outstanding. The split between the first half and second half year profit is not necessarily a good indicator of where you are going to finish."

Mr Loughlin says in the case of lamb, the weather has made it difficult to gain condition, and in beef, farmers have retained stock to control rampant pasture growth.

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