P.P.C.S. says keep works open to force efficiencies

Press, 19 December 1986, Page 25

P.P.C.S. says keep works open to force efficiencies

By

HUGH STRINGLEMAN

The best way to raise efficiency in the meat industry is to keep all South Island works open and competing with each other, the chairman of the Primary Producers Cooperative Society, Ltd, Mr Robbie Burnside, said this week.

Any plant closings make a gift of the throughput to the remaining works and reduce the pressure to make improvements in efficiency, he told agricultural journalists in Dunedin.

P.P.C.S. has already announced plans to cut by about 10 per cent the number of employees at the height of the season by natural attrition if possible.

P.P.C.S. recently acquired all of the Canterbury Frozen Meat Co., which has four processing plants. These are the Canterbury lamb plant, at Belfast, near Christchurch, the beef plant also at Belfast, the Fairton Freezing works, near Ashburton, and the Pareora freezing works, south of Timaru.

P.P.C.S. also has a further processing plant in the Kaikorai Valley, in southern Dunedin.

Mr Burnside and the company chief executive, Mr Stewart Barnett, said this week that P.P.C.S. would release more information about its activities in future. They began by distributing copies of the annual report, which until this year has been published only for shareholders.

The report is to the balance date of August 31, before the complete acquisition of Canterbury Frozen Meat and the sale of nearly all P.P.C.S. shares in Apex Group, Ltd.

The report shows a total gross income for P.P.C.S. of $245 million, compared with $3OB million in the previous year.

It also shows a "turnover” of $2ll million, compared with $290 million in the previous period. The extra income appears to have come from outside investments, in Apex and C.F.M. Direct costs of drafting,

processing, shipping, cutting and selling expenses accounted for $6O million (compared with S47M), administration and financial costs $4.7M (S2.BM) and stock purchases SI6IM ($243M). The co-operative also paid a further $7 million to suppliers to bring them up to full schedule price for stock. It had a distributable surplus of $lO million ($6.6M) after some transfers to reserves.

The directors chose to pay rebates of $2 a head for every lamb supplied and $1 a head for every sheep, as well as other payments for beef.

The lamb distribution is the second-highest per head figure in the last 10 years of the co-operative, which has been operating nearly 40 years.

The accumulated rebates over the decade were $56.8 million which, with the profits made by trading in Apex shares, mean considerable benefits to 12,000 shareholders from membership of the co-operative, say the directors.

Mr Burnside reviewed the history of the Apex involvement, which arose because of the centralised control of sheepmeats marketing by the Meat Board for three years from October 1982.

The Apex investment company was publicly floated, with 40 per cent of shares retained by P.P.C.S., and each cooperative member was offered two 50c Apex shares for every one dollar P.P.C.S. share held.

Apex invested in property and acquired 52 per cent of C.F.M., which was also a public company.

Mr Burnside said meat marketing co-operatives were being told at the time that their days were numbered and when the Meat Board began acquiring all export sheepmeats P.P.C.S. had about $4O million surplus trading monies with which to float Apex. This year Apex made an offer for all the re-

maining shares in C.F.M., while P.P.C.S. sold its 40 per cent share in Apex and the C.F.M. assets were transferred to P.P.C.S. as the processing division of the co-opera-tive.

The effective purchase price of the four C.F.M. works was not disclosed. Mr Burnside claimed the Apex experience attracted large amounts of city investment money into the country and allowed farmers to get some of their money out of co-operative membership at a difficult time for the sheep industry. Any criticism of the dealings of the co-opera-tive during this period tended to come from outsiders or members who had for various reasons not taken up the initial Apex offer. Everyone who had been involved was very happy with the outcome, he said. In an uncertain meat industry, the future for P.P.C.S. was difficult to predict, said Mr Burnside and Mr Barnett.

If would strive to maximise returns for its shareholders, they said, but this did not necessarily mean passing back all profits as they were made.

In some ways co-opera-tives had a greater requirement to retain profits than public companies, they argued, because co-operatives had less ways of raising capital.

Considerable effort is being put into development of further processing methods and products for the whole group. The Kaikorai Valley plant, which employs 54 people in lamb, venison and beef cutting, develops a process and it is then taken out to the C.F.M. facilities.

One . exciting product line is lean, boneless lamb roasts, made from the shoulder and the leg of WX grade lambs, which are all lamb with no additives. Neither have they been mechanically formed, as the Bernard Matthews lamb roast, but

they will stay together in cooking or can be sliced into “lamb steaks” for grilling or frying. The exact process remains a secret, said the product development manager, Mr Russell Jenks. P.P.C.S. markets an undisclosed amount of further processed product in Europe under the name New Zealand Lamb Company, not to be confused with the company of the same name in North America.

It is also looking forward to the opening up of the United States frozen lamb market and the continued market-led expan-

sion of chilled lamb exporting. In the Dunedin plant the co-operative specialises in making up mixed containers of lamb and beef which larger plants often find too tedious.

The completely renovated former Kempthorne and Prosser pharmaceutical plant can do up to 12 product lines at once, said Mr Jenks, and he praised the 10 women on the workforce as making an essential contribution to the work of the plant. The Dunedin plant does not draw any lamb from Burnside, which is owned by Waitaki International,

and Mr Barnett put this forward as a justification for the P.P.C.S. decision this year to deny supplies from Fairton to the Seafield cutting plant of Fortex Group, once Fortex had announced its intention to add a slaughtering section. All the frozen and chilled lamb for cutting at Kaikorai Valley comes down from C.F.M. works. P.P.C.S. claims to be the third-largest further processor in New Zealand.

It also claims to have more members in the South Island than Federated Farmers.