‘Increase in shareholder equity is required’

Alliance Group’ s board has advised farmer shareholders capital investment is required from them if the company is to remain a 100% Aotearoa New Zealand farmer-owned co-operative.

In the last financial year the co-operative sustained a $97.9 million loss because of a collapse in global red meat markets, after a $117.2m profit the year before.

“We acknowledge that times are extremely tough on-farm, and this is not an ideal time to implement such changes,” Alliance Group chairperson Mark Wynne said.

“We have explored all other viable opportunities to reduce working capital before seeking capital from farmers.

“However, in order to remain a 100 per cent farmer-owned co-operative and continue to drive towards our goal of being New Zealand’s most efficient processor, an increase in shareholder equity is required.”

Wynne said with shareholder investment, Alliance could reduce reliance on lenders to fund working capital debt.

Farmers contributed to share capital by deductions from livestock proceeds.

The Alliance board has approved an increase of $3 per livestock unit processed.

The mainly South Island-based Alliance Group was the only 100% farmer-owned red-meat co-operative in the country with two processing plants in Southland, at Mataura and Lorneville.

Other plants were located at Pukeuri near Ōamaru, Smithfield at Timaru and in Nelson.

There were two plants in the North Island, at Dannevirke and Levin.

At the last annual meeting at Alexandra four months ago, then-board chairperson Murray Taggart, said the company was not planning to close plants.

Wynne said over the past 12 months, Alliance had concentrated on cutting costs and optimising market pricing and inventory in order to reduce working capital requirements.

“We’ve made good progress on all fronts. “However, as signalled at the co-operative's annual meeting last year, we do need to raise capital from our farmer-shareholders.”

Wynne said farmers, processing companies, and the agribusiness industry in general, were facing significant financial pressure.

“Our current trading position and forecast indicates we will make a modest profit this fiscal year,” Wynne said.

“This is in line with our financial performance over the last decade where Alliance has been profitable for nine of the last 10 years.”

The board has also approved an increase in the number of shares required to be held per livestock unit processed from 12 to 16.

“The deduction will commence immediately, although the majority of the inflows will occur in the next financial year, when hopefully we will see some lift in the market pricing as we exit the downturn,” he said.

Last year Alliance announced loyalty payments of $0.15 cents per kilogram (cpk), an increase of $0.05c per kilogram for farmers who supplied 100% per cent of qualifying lambs.

For the 2024/25 season, the loyalty payment for qualifying lambs would increase to $0.20c per kilogram.

Cattle and deer would be at $0.10c per kilogram.

Letters with information on the changes would be sent to farmer-shareholders In the next few weeks.