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Alliance questioned on processing delays

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by October 20, 2016 General
Alliance Group chief executive David Surveyor speaks at a co-operative roadshow in Fortrose.

BRITTANY PICKETT/FAIRFAX NZ

Alliance Group chief executive David Surveyor speaks at a co-operative roadshow in Fortrose.

Farmers are front-footing questions about delays in stock processing by Alliance Group.

Senior management and board members at an Alliance Group roadshow in Fortrose, near Bluff, last week were asked by Fortification farmer Allan Fox why there were “unacceptable” delays in trucks being unloaded for processing.

Chief executive David Surveyor said the issue had come up in other roadshow meetings, and said it was a concern to hear some stock may have been off feed for too long before processing, resulting in possible weight loss.

He said there had to be some work done on that piece of the business. 

READ MORE: Alliance likely to pay shareholder dividend at year’s end

“There feels like a chunk of work to do.”

Surveyor said the lamb price predictions for last season were wrong, and wisdom would tell farmers to take whatever the group said about prices with a degree of scepticism because the assumptions would change.

Alliance Group said lamb carcass payments for the next quarter would start at about $6 a kilogram and reduce to $5.30/kg once the chilled programme ended in October. Post-Christmas the prices were likely to be $4.80-$5/kg subject to markets and exchange rate changes.

The “economic engine” of the business had not returned prices farmers wanted and deserved for their stock but there was work going on to cut costs within the business and try to give farmers better prices, Surveyor said.

In the past year the company has reduced its debt by $84 million, down to $45m.

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The last season had been “interesting”. With El Nino there were livestock rushing towards the processing facilities, then it slowed but the company kept its plants open to cater to its suppliers and incurred extra costs, he said.

Overseas, demand was high for lamb.

In North America, demand had been too high to supply, but because they were unwilling to pay more for lamb meat Alliance took its business elsewhere, Surveyor said.

“We’ve seen more demand than we’ve been able to supply.”

Brexit remains an unknown for the meat processor.

“There’s a real question about how it’s going to flow out.”

Alliance Group is also trying to acquire Gold Kiwi Asia, a marketing company based in Singapore. 

Surveyor said the company was not going to understand its Asian customers by being based in the South Island. Acquiring the company would open up opportunities to do more and to get farmers more money, he said.

Alliance is likely to pay a dividend to its farmer shareholders at the end of the year, as a part of a new profit share initiative.

Surveyor did not divulge the dividend amount but said it would not be a large figure.

A huge gap between sheepmeat market prices and the prices the co-operative is seeking had caused an impact of $165m, but as a co-operative Surveyor said the group buffered its shareholders and only passed on $136m in livestock prices, and absorbed the other $28m.

“We are, or we are about to be, the only true co-operative in New Zealand.”

 – Stuff

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