Alliance profit drops to $8m

Alliance Group’s operating profit has fallen to $8 million, from $20.2m last year, in part because it has paid farmers higher prices for stock.

While it had a higher turnover of

$1.8 billion in 2017-18 compared to the year before ($1.5b), it had to pay more than $1.2b to its farmer shareholders for livestock.

Adding to its costs and bottom line, the co-operative increased cattle processing capacity and added overtime to help farmers during the summer dry spell.

‘‘When the rain did come, we made the decision to maintain capacity ahead of the expected second peak in processing volumes. As a co-operative, it is our responsibility to be there for our farmers when they need us,’’ chairman Murray Taggart said.

Debt has risen from $19m to $60m, impacted by late kills in the season.

‘‘We’re looking at debt of $60m. We had very strong August and especially September kills, and quite a bit is still in stock. You simply can’t turn it into cash in time,’’ Taggart said.

Alliance distributed more than

$14m in loyalty payments and another

$31.6m in advance payments to support farmers during periods of low cashflow, but it decided against paying a rebate.

‘‘We thought better to put that money into investing in the future rather than having a profit redistribution and we canvassed that with farmers who were behind that idea.’’

Chief executive David Surveyor said Alliance was making a transition to a ‘‘food and solutions co-operative’’.

‘‘We have been building our capability, strengthening our sales and marketing activity and accelerating the capture of greater market value.’’

He acknowledged profitability had to be lifted to more sustainable levels.