Alliance Group announced a loss of NZD 95.8 million after tax for the year ending the 30th of September 2024 (FY2023 NZD 70.1m loss) on a turnover of NZD 1.8 billion (FY2023 NZD 2b).
The loss includes one-off post-tax costs of NZD 48.2m related to business restructuring and other one-off adjustments, including the costs associated with plant rationalisation and redundancies following the closure of the company’s Smithfield plant in Timaru.
This meant Alliance’s underlying financial result was NZD 47.6m loss after tax.
“This is a disappointing financial result for Alliance and reflects the tough global trading conditions, especially for lamb, which accounts for a high proportion of our portfolio,” said Mark Wynne, Chair of Alliance Group.
“In response, Alliance launched a comprehensive reset designed to lift the company's performance. We have worked hard to build the company’s financial resilience, significantly reduced costs, rationalised our processing capacity, improved our offering to farmers and invested in technology.”
Wynne said these decisive steps meant they had turned a corner on a tough two years.
“We’re leaner, more agile and ready to ride the upturn in global red meat pricing. We have seen positive signs in the past few months and are now forecasting a return to profitability in the current financial year.”
He added that the decline in shareholder equity in recent years and the ongoing global market uncertainty meant Alliance Group had to make the tough but necessary decision to strengthen its balance sheet with capital from farmer-shareholders.
“We understand the burden of asking our farmers to reinvest in difficult circumstances. We pulled every available lever to ease the pressure, including reducing inventory, accelerating global market payments, and cutting operational costs.”
The company has appointed Craigs Investment Partners to explore external capital-raising options.
While Alliance is at the very early stages of the process, they have seen encouraging interest from both international and domestic parties.
Before making any decisions, they will assess any external opportunities based on strategic fit, value and expected benefits for the company and its shareholders. Ultimately, the final decision will rest with the farmer shareholders.
Willie Wiese, Alliance's Chief Executive, said the company worked hard to improve its offering to farmers as part of a programme to rebuild trust and confidence.
“Enhancing the value we deliver to our farmers has been a key focus of our reset this year. We introduced a more equitable livestock pricing schedule, reshaped our loyalty programme, and committed over time to bringing in a simplified ‘all-in’ processing sheet.”
The company made significant progress on critical technology projects, including its Enterprise Resource Planning (ERP) programme.
Its Finished Goods Warehousing project has modernised inventory management and the order-to-cash process, reduced business risk and increased cash velocity through faster inventory turnover and cash collection.
It has also rolled out the Meat Eating Quality (MEQ) programme across its plant network. Powered by cutting-edge artificial intelligence, this technology measured intramuscular fat (IMF) levels in lamb and marbling percentages in beef, providing real-time data on eating quality.
This data has offered farmers valuable insights to inform breeding and feeding programmes, leading to more sustainable livestock management and consistent quantifiable meat quality.
Wiese added that global markets remained exceptionally challenging, with prices decreasing as consumers continued to tighten their spending reins in the face of the cost-of-living crisis.
“Sales value and volume to the Chinese market nearly halved this past financial year. While China had been our largest market, we used this opportunity to develop significant commercial alternatives, making solid progress in establishing more stable and consistent markets outside China,” said Wiese.
“Although global markets remain tough, we saw steady demand growth throughout the year, with prices gradually climbing. Beef has been trading strongly above its five-year average price, driven by the drought in the United States. After two years of downward pricing pressure, lamb appears to be coming off the bottom of the price cycle.”
Alliance Group has become more agile and leaner, better positioned to capture excellent market value and deliver more substantial returns to its farmer shareholders.
