Silver Fern Farms Annual Results 2023: Results Reflect Challenging Market Conditions

Silver Fern Farms Co-operative and its investment, Silver Fern Farms Limited, have today released their Annual Results for the 2023 year.

Silver Fern Farms Limited has posted a $24.4 million loss after tax, with revenue decreasing $497 million on the previous year to $2.78 billion. Silver Fern Farms Co-operative has posted a $10.7 million loss after tax.

Silver Fern Farms Co-operative Chair, Rob Hewett says the financial results reflect a year of challenging market conditions which have impacted the whole supply chain.

“Depressed consumer confidence across our key markets has put pressure on our customers, the Operating Company, and ultimately, returns for our farmer suppliers,” he says.

“We also felt the impact of one-off events throughout the year, such as Cyclone Gabrielle which caused damage and disrupted operations at the Dargaville and Pacific (Hawkes Bay) processing sites for a number of weeks.

“Like all our partners in the supply chain, and in particular our farmer suppliers, the Operating Company continues to carefully manage costs and reprioritise large elements of their proposed spend until there is greater confidence in the market’s recovery,” he says.

After several years of strong performance and record returns to shareholders, Hewett says it is disappointing to not be in a position to distribute any dividends but is confident in the Operating Company’s ability to recover when market conditions become more favourable.

“The Board regularly reviews the strategy and is confident that Silver Fern Farms’ strategy and direction of travel is the right one. However, it’s critical the business continues to adjust to the market conditions we are currently facing,” he says.

“We still have a few macro levers working against us and it’s prudent we adjust accordingly. However, this is also a moment in time that will pass, and we need to strike the right balance of managing costs but also retaining capability in the Operating Company so they can continue the momentum built over the last few years.

“The business has still been able to invest over the past year, and this investment will support the business through the challenging year we have ahead, and accelerate when more favourable conditions return.

“Ultimately, through the recapitisation of Silver Fern Farms in 2016 and recent years of favourable performance, the Operating Company is in a better position to manage through the cyclical downturns of the red meat industry than it has been in the past,” he says.

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Silver Fern Farms Limited Chief Executive, Dan Boulton, says challenging market conditions were experienced across the course of last year and are expected to persist well into the current year.

“The fundamentals of the market conditions we are facing are well understood. Weakened market sentiment has been compounded by increased supply dynamics out of the likes of Australia and South America. This has added more volume to already high in-market inventory levels, and put downward pressure on pricing,” he says.

“While we are expecting a recovery in beef pricing in the shorter term due to increased demand out of the US, we are expecting that sheepmeats will take longer to recover. Venison returns have been less impacted overall, thanks in part to increased investment in new market opportunities over the last few years,” he says.

Boulton says that the change in market conditions has meant Silver Fern Farms has adjusted the pace of its planned investment and focused on reducing operating costs.

“We’ve made some difficult but necessary calls to slow the speed of our planned investment, and in particular, our technology and transformation investment. Some technology programmes that were in progress will be finished, however the timing of some larger projects has been deferred until our spending envelope increases,” he says.

“There has also been an ongoing focus on cost management and optimising our day-to-day operations. Non-critical spend and investment have been deferred, and the business is focused on prioritising the core aspects of the business, from operations, through our supply chain, and into market.

“We see the current market conditions we are facing as a cyclical adjustment which will improve in the mid-term. The direction and our ambition for the business has not diminished, however we will continue to adjust the pace of our implementation to ensure that we are fit and appropriately resourced,” he says.

Despite the broader challenges being experienced in the market, Boulton says the business remains committed to its market-led strategy.

“We continue to see evidence of our recent focus and investment playing out, and we haven’t lost confidence in our longer-term direction of travel. While it’s still a growing proportion of our business, we’ve seen that where we have invested in our brand, we have been able to retain value relative to decreasing commodity pricing,” he says.

“At a time when markets are generally depressed, we are nevertheless seeing more higher value customers and consumers connect with the Silver Fern Farms’ brand and the product our farmers are producing.

“In particular, we continue to see strong interest and engagement from our key customers in our Nature Positive programme of work. Demonstrating progress towards sustainability metrics is becoming the reality of doing business, and we are increasingly seeing confirmation this is a key competitive opportunity for our company and suppliers,” he says.

Boulton says despite the reduction in overall farmgate pricing relative to the previous year, Silver Fern Farms continues to layer more value above the weekly operating price by rewarding suppliers who are aligned with market signals.

“We’ve increased our programme premiums to farmers on beef and lamb supply, and created a new venison supply programme. Furthermore, suppliers are also benefitting from new value streams created through our Net Carbon Zero and NZ Farm Assurance Plus programmes,” he says.

“Global demand for sustainable protein continues to grow, and we believe Silver Fern Farms is in the best position to capture this through our focus and investment. In the last year, we’ve achieved record farmer shareholding, and record staff and customer engagement. These metrics speak to the alignment right across the business,” he says.

Boulton says the company has improved processing capacity after a few years of disruption, primarily due to labour shortages.

“We’ve improved our processing capacity for the current season thanks to recruitment and retention plans and around $70 million of investment into our site network which has improved reliability. This was particularly important leading into what many were forecasting to be a drier season impacted by El Niño,” he says.

“However, the reality is that feed levels have been good across large parts of the country, and the industry is experiencing lower than expected livestock flows. This has presented challenges to our operating efficiency through the first quarter of this year, and we’ll need to continue adjusting to meet what looks like another challenging year ahead,” he says.

Financial Results Summary

Silver Fern Farms Limited result for the 12-months to 31 December 2023:

• Revenue $2,780.8m (FY2022: $3,277.8m)
• Earnings before interest, tax, depreciation and amortisation (EBITDA) including share of associate earnings $16.4m (FY2022: $301.3m)
• Net loss before tax $36.4m (FY2022: Net profit before tax $262.6m)
• Net loss after tax $24.4m (FY2022: Net profit after tax $189.3m)
• Capital expenditure $106.8m (FY2022: $96.0m)
• No dividend paid (FY2022 $76.9m)

Silver Fern Farms Co-operative result for the 12-months to 31 December 2023:

• Net loss after tax $10.7m (FY2022: Net profit after tax $94.1m)
• No dividend to be received based on FY2023 (FY2022: $38.45m)
• No debt. Cash and short-term deposits of $35.6m (FY2022: $34.6m)
• Total Shareholder Equity of $406.8m (FY2022 $438.4m)
• Co-operative declares no dividend and patronage reward for shareholders (FY2022 $33.5m)
• Closing share price at 28 March 2024 - $1.04

Silver Fern Farms Ltd is New Zealand’s leading processor and marketer of beef, lamb, mutton, venison and associated products to more than 60 countries and regions.

The company operates 14 processing facilities throughout the country, employing more than 6,000 staff. Key markets in New Zealand, China, North America, the United Kingdom and Europe, Asia, and the Middle East are supported through a network of international offices.

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