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PPCS pre-tax loss in difficult year

02-11-2007 | webmaster

The largest venison processor, the co-op PPCS announced a NZ$40 million before tax loss for the past financial year and Chairman Reese Hart says it expects other meat companies have also suffered from the difficult trading conditions.

"Despite unsatisfactory profitability for the year, the underlying financial position of PPCS is sound and improving and all other key PPCS financial indicators showed a positive trend," Hart reports.

Hart identified challenges that had an impact this past year as being currency movements, processing capacity that is not well "aligned" with livestock supply, cost of inventory and procurement prices that did not reflect realities of the currency and market.

He reports PPCS is part of a group of primary produce exporters that got together about a year ago to discuss mutual issues such as the impacts of the strong Kiwi dollar with the government. The group commissioned an independent report which it presented six months ago, outlining the effects of currency and increasing compliance costs.

"We recognised that we all did want to talk about it so we may as well do it together," Hart says. "We've had two rounds of meetings with Government so far and we've had a good hearing. We'll have another meeting before the end of the year." The meetings include sessions with government ministers Phil Goff, Trevor Mallard and Jim Anderton.

 "Suppliers do expect us to make approaches to government to see what can be done," he adds. "At the same time, we've still got a business to run and we have to get on and manage it."

He says the company's two-year strategic plan, which was put on hold while a merger with fellow co-op Alliance was considered, is now being implemented.

PPCS held a briefing about its annual result for media and investors in Wellington for the first time earlier this week.

Hart told TDF there are "more interest groups" wanting to gain insight into the company's operations. The two current bond issues, which PPCS issued in December 2004 and December 2006, provide an alternative capital stream, separate from the shareholders and banks, however he says there are requirements for more public disclosure about company operations as a result.

The company currently has $125 million in bonds. The bonds are on a fixed interest rate and offer holders flexibility because they can be traded.

Hart was accompanied by CEO Keith Cooper and chief financial officer Rob McFarlane.

Among the PPCS interest groups, it turns out, are investors in the Dunedin-based company Scott Technology, which has been working with PPCS for the past five years to develop robotics for meat processing.

Scott Technology released its annual result as well, a profit of just over $3 million according to the Sunday Star Times, with one major institutional investor saying the market is "failing to recognise the value of its new robotic meat processing technology".

"The vision is: the carcass in one end, cuts out the other end," managing director Chris Hopkins is reported as saying.

Robotics promise greater efficiencies, can improve carcass yield through leaving less meat on the bone, potentially reduce labour costs and can improve safety in a plant.

Keith Cooper told TDF the development of the robotics technology is occurring at its Silverstream plant for sheepmeat processing and PPCS wants it developed for venison processing.

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