SFM did well in spite of problems

Press, 20 January 1982, Page 21

SFM did well in spite of problems

In spite of a record profit of SS.BM in the year ended October 1. Southland Frozen Meat. Ltd. experienced a difficult and disappointing year's trading in lamb, the chairman (Sir Alan Gilkison) says in the company's annual report. The year opened with poor lamb trading conditions and an air of uncertainty, particularly in view of the IranIraq conflict. Then after the E.E.C. sheepmeats regime came into being the market was again depressed. After referring to further fluctuations throughout the year in the United Kingdom market. Sir Alan points to the efforts by Towers (The Waitaki-SFM marketing arm) to hold prices. However. not all parties were prepared to take such a firm stand.

"The importance of taking such a firm stand for the sake of the farmer in New Zealand can be understood when it is realised that from the beginning to the end of July, for instance, the approximate reduction in return tor a PM carcass was $5.80.” he says.

By August prices had bottomed out and improved to the still disappointing 47p per lb. Sir Alan says. On the trading outlook, he says: “The introduction of high prices in the Supplementary Minimum Price Scheme this year has brought the sobering realisation that, as the industry starts its second century, the all-important farmers' re-

turns will not in the short term meet the economic yardstick by which stock values, and therefore farming viability, are measured. “Not unnaturally, many look to the industry to cut costs, but it has little control over annual wage trends or inflation.

“Wages and salaries make up 60 per cent of the costs of a meat processing plant.

“The other costs are made up of: processing and packaging, 10 per cent; energy, 5 per cent; accident compensation levy, superannuation, insurance. and profit. 12 per cent; depreciation and interest. 8 per cent, repairs and maintenance. 5 per cent.'

All these have been affected by inflation. Sir Alan savs.

The United States beef market remained difficult with an over-supply from domestic sources and cheaper meat ' from Australia.

Sir Alan says that the change to fast food eating in the United States had not helped ground beef, and the rise to 21 per cent in the prime interest rate had an extremely dampening effect on the market.

Some importing companies went bankrupt and others were in a poor financial shape.

The fancy meats market also proved difficult with lamb liver prices at year-end at the lowest level reached for some vears.

As reported, group net

profit rose $597,000 to $5,836,000 after tax of $1,348,000 ($131,000) and depreciation of $2,951,000 ($2,666,000).

A 7.5 per cent centennial dividend has been added to the unchanged basic 15 per cent. It is covered 2.4 times.

The earning rate on shareholders' funds improved from 9.1 to 9.5 per cent.