Bid for N.C.F. Kaiapoi

Press, 15 March 1978, Page 14

Bid for N.C.F. Kaiapoi

Commercial

By

ADRIAN BROKKING,

commercial editor

After many months of discussion, mainly among farmer interests, Meat Producers’ Board is poised to take overa meat works: It is I preparing a bid for N.C.F. Kaiapoi, Ltd, the freezing works owner in Kaiapoi. I The offer price is mooted ■to be 700 c for each 100 c i share in N.C.F. Kaiapoi I which values the operation at a little more than S4M. Kaiapoi is a small works I — there are not many ■ smaller in New Zealand — | but to build a works today, 'with three chains, would cost more than S2OM. Fixed assets are in the books at around S2M, and shareholders’ funds are about the same. The shares have an asset backing of 308 c a share, and last sold at 175 c. Three sales were reported last year, and none so far this year. The company is owned 41 per cent each by Waitaki N.Z. Refrigerating, Ltd, and Canterbury Frozen Meat Company. Ltd: the balance of 18 per cent is held mainly by farmers. It is understood that C.F.M. and Waitaki N.Z.R. have been more than cooperative, provided their price was met.

Kaiapoi is mainly a mutton works at present, and works two and a bit chains. Throughput is between 600,000 and 700,000 sheep and lambs; it has no beef killing facility. It is integrated to a considerable degree into the operations of its, two big owners. C.F.M. buys and tenders all the material from Kaiapoi that needs to be processed in this way; but this agreement can be terminated by either party at a year’s notice. Both main shareholders also share the free meat and skins — the product that is not processed specifically for other interests. It is thought that Waitaki and C.F.M. will retain this right for several years.

The two companies also provide specialist services for Kaiapoi — such as engineering and laboratory services.

If a producer-owned company receiving the Kaiapoi works were to quit these arrangements, it would have to establish additional facilities.

N.C.F. Kaiapoi incurred a net loss of $2756 last year. The average profit for the five years before that was

$192,000. Assuming profitability at the 1976 level ($227,000) the return on an outlay of S4M would be about 5.7 per cent. In any case, a small independent meat-works is likely to be more vulnerable, economically and industrially, than the larger groupings. The Meat Board has never had a great deal of enthusiasm for the idea of farmer-owned works — it knows too well the difficulties facing the industry, and the need for raticmalisation and it can not easily be seen how a producerowned N.C.F. Kaiapoi would contribute to more rationalisation.

But the board has been under considerable pressure from farmers, and the latest move will at lease give farmers the foothold in the industry which they consider vital to their interest — it will provide them with the opportunity to find out at first hand how much it costs to run a freezing works.