Alliance Group Optimistic About The Future
Alliance Group has made the necessary changes to the co-operative to ensure it can better navigate the volatility in global red meat markets and return to profitability, shareholders were told at the company’s Annual Meeting in Alexandra today.
“We are all very disappointed with this year’s $97.9 million loss, which coincided with our 75 th anniversary and followed a record result for the co-operative the previous year,” said Murray Taggart, Alliance Chair.
“However, the improvements we have made to the business over recent months mean the co- operative is now fitter, more resilient and able to more efficiently deliver for our people, our farmers and our customers.”
All red meat processors/exporters were impacted by the deteriorating global market, although Alliance was particularly affected by the sharp decline in sheepmeat pricing and demand.
“Soon after last year’s Annual Meeting in December, the extent of the market collapse became apparent, especially for sheepmeat. Following a brief recovery, the Chinese market crashed and the downturn spread to other markets around the world. Margins remained compressed for the remainder of the year as all New Zealand exporters struggled to re-position product into other markets, which resulted in lower prices than justified by farm gate schedules.”
Alliance Group also incurred additional costs bringing on extra processing capacity for farmers in anticipation of a 2023 summer drought, which never eventuated.
“The combined impact of these market and weather factors saw profitability slump and reduced revenue of just over $2 billion. Operating cashflow was positive, but unacceptably low at a $2 million surplus.”
Increasing red meat prices in offshore markets in recent years had masked areas within Alliance’s business that were not operating effectively, however the company has addressed these weaknesses, said Mr Taggart.
“Normally these areas for improvement would have been more transparent, but the implementation of our Enterprise Resource Planning technology project has not been plain sailing with some aspects of the implementation delivering outcomes below expectations.
“While most of those challenges are now behind us, further refinement of the new system over the next 24 months will build more resilience into our new business processes.”
Alliance is focused on ensuring efficient use of its fixed assets and working capital, he said.
“The business has made significant improvements in working capital management in recent years, but there is more work to be done in that space. We are also reviewing our fixed assets to confirm which assets are core, and which assets may not be delivering an adequate return.
“This does not mean we are considering processing plant closures, but we do have significant assets outside of our core processing facilities, which we are reviewing so we can assure our farmer shareholders we are investing their capital wisely.”
The Board has also identified that while revenue and the company’s balance sheet have been growing, shareholders’ funds have not been increasing at the same pace, he said. “Despite measures adopted in recent years to accelerate growth in shareholders’ funds, there needed to be more progress in this area. We need all shareholders to contribute to the growth in shareholders’ funds, not just those who have joined the co-operative in recent times. To this end, the Board is considering other options to increase the level of shareholders’ funds.
“We aim to ensure this process is fair and equitable and are acutely aware farmers need us to maximise their returns at the same time as ensuring Alliance is adequately capitalised.”
Alliance Group Chief Executive Willie Wiese said the new season has started on a much more positive note than the equivalent time last year, and despite still operating in a tough trading environment, the company is on track to deliver the expected 2024 budget outcomes .
“The weak market conditions and continuing reductions in livestock numbers across New Zealand remains a concern, and we have accommodated this to some extent in our forecasting for this financial year. Fortunately the significant investment in automation and decarbonisation we have made in recent years, along with more flexible labour arrangements, mean that the business is better placed to weather difficult trading conditions than it has previously and return more value back to our farmers.
“We have identified a number of opportunities to create more value from the market, across both our traditional meat cuts and solutions, ingredients and materials. We are also really excited by the opportunities to measure eating quality offered by our new Intramuscular Fat (IMF) probe technology and the additional value this will enable us to extract from the market.
“Looking back, 2023 has been an incredibly tough year for Alliance. The Alliance team has gone above and beyond what would normally be expected of them to see us through the tough times.”
Meanwhile, Mr Taggart said the co-operative is keen to see the new Government proceed with policy changes including introducing limits on the ability of fossil fuel emitters to offset 100 per cent of their greenhouse emissions by planting trees, reducing red tape, and landing improved trade agreements and market access.
“Continuing to make a deal with India conditional on the inclusion of dairy is unrealistic and is handing Australia a huge and growing market at our expense.”
Directors’ election results
The successful candidates to fill two vacancies on the board of Alliance Group are Ross Bowmar and Richard Greer.
45.6 per cent of eligible votes were exercised in the directors’ election.
25.16 per cent of shareholders voted.
| CANDIDATE | NUMBER OF VOTES |
| Ross BOWMAR | 25,902,211 |
| Richard GREER | 19,358,535 |
| George TATHAM | 17,464,344 |
| Pat McEVEDY | 13,193,335 |
| Jeremy McPHAIL | 5,214,530 |
| Informal papers received | 2,002 |
| Invalid votes | 4,182 |
The unsuccessful candidates were George Tatham, Pat McEvedy, Jeremy McPhail.
