Cutting emissions market-driven: SFF
"It's not about the Paris Climate Accord or domestic methane targets. It's wholeheartedly driven by the markets you need to be in," chief executive Dan Boulton told shareholders attending yesterday's annual meeting of Silver Fern Farms Co-operative in Dunedin.
Many high-value customers were addressing their own emissions reduction targets while many farmers were also implementing changes on farm to improve efficiencies and reduce emissions.
Some might call it woke, but the company's view was that given New Zealand farmers' track record of environmental progress and efficiencies, it would be "irresponsible to walk away from it", he said.
Customers were willing to invest in new ways of achieving targets and they were not interested in domestic debate around historic land use change in New Zealand, or that New Zealand contributed only a small percentage of global emissions.
"They are only interested in what is in their supply chain," he said.
Silver Fern Farms invested $9.1 million in AgriZeroNZ over the last two years, and held a shareholding of about 7.59%.
That investment represented about 0.1% of total revenue. Customers in markets who made public commitments represented about 20% of its revenue and that was growing, he said.
The investment in AgriZeroNZ was about options to meet that market driver without compromising key market advantages. There were a range of tools AgriZeroNZ was investing in which would go through rigorous testing.
Some farmers might not be open to that "direction of travel" and it would not be forced on them. Many would be happy to accept it.
He made no apologies about creating options for farmers to make sure they stayed aligned with what the markets wanted, he said.
It was about finding solutions and options to address customers needs — to ensure the company maintained market access and its highest-value customers — and make it cost effective and easy to implement on-farm.
Earlier this year, Silver Fern Farms announced a $21.8m net loss after tax for the year ended December 31, a $2.6m improvement on last year's result.
Revenue was down $144m to $2.6 billion, ebitda was up $16.3m to $32.7m and capital expenditure was more than halved, down to $52.5m.
Silver Fern Farms Co-operative, which jointly owns Silver Fern Farms Ltd with Bright Meat Group, recorded a net loss after tax of $10.9m, up from last year's $10.7m loss.
Mr Boulton reiterated it was disappointing to post a loss but, without greater cost control and commercial discipline, the result would have been significantly more unfavourable.
Looking at the year ahead, livestock volumes were materially lower than expected and the industry had adjusted by removing capacity earlier than was typical.
Lamb kill was back 8%, predominantly in the South Island, and the national beef kill was back 6% for the season to date.
It would be the second consecutive challenging winter for processors, which created downstream challenges, and action and leadership was needed across the industry to address structural issues.
Improved pricing was expected to stay around for the foreseeable future and that pricing had been rebuilding confidence in farming, as farmers looked to expand and buy more land.
"Coming into this year, we are a fitter, more resilient Silver Fern Farms," he said.
Protein demand would outstrip supply for the year ahead and growing concern around food security provided significant opportunities for New Zealand to leverage.
"There's a lot to be excited about if you're a producer here in New Zealand," he said.
Last year, Silver Fern Farms Co-operative bought a 12.5% stake in Woolworks for $18.486m.
Silver Fern Farms Co-operative chairwoman Anna Nelson yesterday said better wool returns were essential for the overall viability of sheep farming.
Asked about any potential conflict of interest with outgoing Silver Fern Farms director Rob Hewett being chairman of Woolworks, she said an extensive due diligence process was followed "with Rob firmly out of the room".
sally.rae@odt.co.nz
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