November 19, 2024 • 9 mins
We ask the Chair of the Alliance Group if the meat-processing co-op has hit rock bottom and is rebounding after yesterday reporting a $95.8 million loss (on top of last year's $70.2 million loss). Plus we ask who, or what, is to blame for the dismal performance?
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Trouble at mil for the Alliance Group. Yesterday, the meat
processor came out with its annual result, a ninety five
point eight million dollar loss, on the back of seventy
million dollar loss the year before. The chair is Mark One,
of course, former chief executive of Balance Agrinutrients. Is this
a tougher gig than a fertilizer company? Mark?
Speaker 2 (00:20):
Yeah, Good afternoon, Jeremie. Yeah, the meat industry is certainly
a tougher industry than any other that I've worked in. Okay,
no doubt about that.
Speaker 1 (00:29):
Well, let's crunch these numbers. That's two huge losses in
consecutive years. Are you going to run out of rope here?
Will the banks pull the pin on you? How bad
is this crisis?
Speaker 2 (00:40):
Well, certainly it's a very disappointing result when we look
at our loss at ninety five point eight, But when
we unpicked that, there is a lot of one off
cost that we've incurred this year as we reset the business,
so that covers things like redundancies, impairments, etc. And that's
(01:01):
quite a large figure. So if you expect that out
because they're one often and not recurring, they'n our trading loss.
If you like our underlying loss is forty seven million,
so still disappointing, but not as bad as the headline number.
Speaker 1 (01:18):
Why are other meat companies making profits? And I know
a f CO doesn't publicly report, I understand they are
making a profit. We know that ANSCO is Why can't
Alliance Group make a profit?
Speaker 3 (01:29):
Well, it's a good challenge.
Speaker 2 (01:31):
The primary reason is that Alliance is the only large
meat processor that's predominantly lamb.
Speaker 3 (01:39):
Based, whereas most.
Speaker 2 (01:41):
Of the others are beef dominated processes. And the global
beef market has been trading quite comfortably above its five
year global price average, driven by the droughts and shortage
of beef in the US. Unfortunately for US on the
lamb side has had two years of price decline, so
(02:03):
about a twenty five percent decline in the twenty two
to twenty three year and then a further ten percent
decline in twenty three twenty four and that just makes
the returns available from the market really challenging. But having
said that, in the last couple of months, we've now
seen what we believe is a bounce off the bottom.
(02:23):
We've got green shoots on price increases coming through in
every market, but particularly China, which really sets the global
land price. So yeah, things are on the mend, which
is great news.
Speaker 1 (02:35):
Oh well, hopefully with that rock bottom, why don't you
try and get bigger share of the beef market.
Speaker 2 (02:41):
Certainly we have and we continue to try that. Our
beef has gon very well for lights over the last
five or six years, and we would expect that to
continue in the years ahead and sort of rebalance our portfolio.
And so if you look at if you go into
a helicopter view looking at the risks, we basically have three.
(03:02):
So we're very southland dominated and that can be a
challenge in weather events like we've just seen. We're very
ovineal land dominant, and we need to grow our beef
as part of our portfolio to balance that risk out.
And the third one was we were very China dependent,
and over the last twelve months we have by design
(03:25):
we have harved our exposure into the Chinese market to
do risk and I think looking at you know, some
of the potential geopolitical nonsense it's going to go on
in the New World over the next few years, you
need eggs spread into many baskets. So we're addressing all
of those risks as fast as we can.
Speaker 1 (03:43):
What's your debt versus liabilities versus asset equation? How how
much in debt are you?
Speaker 2 (03:50):
Yeah, we've got We've got quite a considerable amount of
debt and that is obviously eroded our equity position and
that's really the driver for the capital rays. And so
we've done an internal capital raise which is deductions off
the processing sheet and that's we kicked that off at
the end of April this year and that is ongoing,
(04:14):
but we missed the peak season effectively for that, so
we don't really have any good numbers on that side
at the moment. But secondly, we kicked off an external
capital rays by the appointment of Craig's Investment Partners about
a month ago, so we're very early in that process.
But we'll be looking for external capital as well as
(04:35):
internal and will present those options back to our shareholders.
Speaker 1 (04:39):
Would you would you have to be a mug to
invest in the in the meat industry, the red meat industry,
especially the sheep meat industry at the moment, because I
understand your capital rays with a lot of your supplies
went down like a lead balloon.
Speaker 3 (04:51):
Yeah, at the time, it couldn't have been worse.
Speaker 2 (04:53):
We acknowledged that, but our priority was to give farmers
and our shareholders the best option keeping Alliance as one
hundred percent farmer owned cooperative. Now they ultimately will vote
on that through livestock flow in the shorter term, and
some of them are very clear they don't want to
(05:15):
keep Alliance as a cooper, they don't want to put
more in. Many do, so that will work its way through.
Speaker 3 (05:21):
That's the farmer's choice.
Speaker 2 (05:22):
But meantime we have to look at external capital so
that we've always got an option to put back in
front of shareholders. Now, would you invest in a sheep
meat company? That's a million dollar question for or multimillion
dollar question probably for the new investors to work their
way through. But as we present it in our forty
(05:45):
two Woolshed meetings, there are two groups broadly that we
would see that would be interested. So one would be
food security investors looking to lock up or ensure secure
supply protein into the future. That would be group one,
And the second one would be a current needs player
(06:05):
looking to consolidate a portfolio to have a stronger offering
for their consumers around the world.
Speaker 1 (06:11):
Why not do our silver fir and farms get into
a hybrid or a joint venture operation.
Speaker 2 (06:17):
Well, I think that's certainly one of the realistic options.
We have again presented back to our shareholders that said,
if you back us, we will remain one hundred percent
farm our owned cooperative. If that doesn't work, then the
next option is some kind of a hybrid, joint venture,
or at the shareholders discretion entirely, they may decide to
(06:38):
sell us off one hundred percent. So those are the
three options that still are in front of us, and
it will be the shareholder's choice when we go back
out to them sometime around late July next year.
Speaker 1 (06:49):
Your agm is and gore on the eighteenth of December.
That could be a fiery meeting, Yes.
Speaker 3 (06:54):
It could.
Speaker 2 (06:56):
Look I don't mind fiery meetings. That shows passion and
and challenge. In fact, we had plenty of fiery meetings
in our forty US Woosheed meetings throughout till I September,
and look at it's our responsibility to give shareholders listening
to and understand their concerns and frustrations and make sure
(07:19):
that we address them as best we can inside the
strategy and the governance and the covenants that you have
as aboard. But look, I hope there's lots of questions
in Gore. Our result is what it is, but I
think we've pulled all the necessary leavers to set us
up for a successful future and return to profitability.
Speaker 1 (07:41):
Okay, final question for you, and this one will probably
be asked at the AGM and Gore on the eighteenth
of December. Was the Alliance Group grossly mismanaged under David Saveya,
the previous chief executive.
Speaker 3 (07:55):
No, I don't think so.
Speaker 2 (07:57):
Look, I think it's different, different requirements in different times.
We've entered two years of negative market pricing, which puts
massive stress on any business, and that's combined with at
the same time, we were required to invest capital in
both compliance through work safe legislation changes and landing our
(08:20):
ERP upgrade.
Speaker 3 (08:21):
So we've done those.
Speaker 2 (08:23):
We've now addressed our cost structure. We've addressed our manufacturing
surplus with the closure of Smithfield, We've addressed our farmer
facing issues, we've de risked China, we've massively reduced our
cost So I think different times require different strategies, and
we're a whole lot more agile and focused.
Speaker 3 (08:47):
Going forward.
Speaker 2 (08:47):
So we're looking forward to the year ahead with a
whole lot more confident in our teams.
Speaker 1 (08:53):
Of property right, and I've just got one more. This
one will turn up at the AGM as well. Are
there plant closures finished as smith Field the last of
the rationalization or eat as critical mass working against you?
Speaker 2 (09:06):
I know we're very comfortable now with our projected livestock
flows and our process and capacity installed. Longer term, who knows,
because the industry still has declining stock numbers, but from
an Alliance point of view, we're pretty comfortable. Our view
of the rest of the industry and others will make
(09:26):
their own decisions, is that there's probably another seven or
eight plants that need to change and close, particularly in
the ovine space. It's not over for the industry, but
we're comfortable. Will we sit right now?
Speaker 1 (09:38):
Good on you, Mark, when I know yesterday was a
tough day at the office. Thanks for some of your time,
Chair of the Alliance Group.
Speaker 3 (09:44):
Thanks so Amic
Trouble at mil for the Alliance Group. Yesterday, the meat
processor came out with its annual result, a ninety five
point eight million dollar loss, on the back of seventy
million dollar loss the year before. The chair is Mark One,
of course, former chief executive of Balance Agrinutrients. Is this
a tougher gig than a fertilizer company? Mark?
Speaker 2 (00:20):
Yeah, Good afternoon, Jeremie. Yeah, the meat industry is certainly
a tougher industry than any other that I've worked in. Okay,
no doubt about that.
Speaker 1 (00:29):
Well, let's crunch these numbers. That's two huge losses in
consecutive years. Are you going to run out of rope here?
Will the banks pull the pin on you? How bad
is this crisis?
Speaker 2 (00:40):
Well, certainly it's a very disappointing result when we look
at our loss at ninety five point eight, But when
we unpicked that, there is a lot of one off
cost that we've incurred this year as we reset the business,
so that covers things like redundancies, impairments, etc. And that's
(01:01):
quite a large figure. So if you expect that out
because they're one often and not recurring, they'n our trading loss.
If you like our underlying loss is forty seven million,
so still disappointing, but not as bad as the headline number.
Speaker 1 (01:18):
Why are other meat companies making profits? And I know
a f CO doesn't publicly report, I understand they are
making a profit. We know that ANSCO is Why can't
Alliance Group make a profit?
Speaker 3 (01:29):
Well, it's a good challenge.
Speaker 2 (01:31):
The primary reason is that Alliance is the only large
meat processor that's predominantly lamb.
Speaker 3 (01:39):
Based, whereas most.
Speaker 2 (01:41):
Of the others are beef dominated processes. And the global
beef market has been trading quite comfortably above its five
year global price average, driven by the droughts and shortage
of beef in the US. Unfortunately for US on the
lamb side has had two years of price decline, so
(02:03):
about a twenty five percent decline in the twenty two
to twenty three year and then a further ten percent
decline in twenty three twenty four and that just makes
the returns available from the market really challenging. But having
said that, in the last couple of months, we've now
seen what we believe is a bounce off the bottom.
(02:23):
We've got green shoots on price increases coming through in
every market, but particularly China, which really sets the global
land price. So yeah, things are on the mend, which
is great news.
Speaker 1 (02:35):
Oh well, hopefully with that rock bottom, why don't you
try and get bigger share of the beef market.
Speaker 2 (02:41):
Certainly we have and we continue to try that. Our
beef has gon very well for lights over the last
five or six years, and we would expect that to
continue in the years ahead and sort of rebalance our portfolio.
And so if you look at if you go into
a helicopter view looking at the risks, we basically have three.
(03:02):
So we're very southland dominated and that can be a
challenge in weather events like we've just seen. We're very
ovineal land dominant, and we need to grow our beef
as part of our portfolio to balance that risk out.
And the third one was we were very China dependent,
and over the last twelve months we have by design
(03:25):
we have harved our exposure into the Chinese market to
do risk and I think looking at you know, some
of the potential geopolitical nonsense it's going to go on
in the New World over the next few years, you
need eggs spread into many baskets. So we're addressing all
of those risks as fast as we can.
Speaker 1 (03:43):
What's your debt versus liabilities versus asset equation? How how
much in debt are you?
Speaker 2 (03:50):
Yeah, we've got We've got quite a considerable amount of
debt and that is obviously eroded our equity position and
that's really the driver for the capital rays. And so
we've done an internal capital raise which is deductions off
the processing sheet and that's we kicked that off at
the end of April this year and that is ongoing,
(04:14):
but we missed the peak season effectively for that, so
we don't really have any good numbers on that side
at the moment. But secondly, we kicked off an external
capital rays by the appointment of Craig's Investment Partners about
a month ago, so we're very early in that process.
But we'll be looking for external capital as well as
(04:35):
internal and will present those options back to our shareholders.
Speaker 1 (04:39):
Would you would you have to be a mug to
invest in the in the meat industry, the red meat industry,
especially the sheep meat industry at the moment, because I
understand your capital rays with a lot of your supplies
went down like a lead balloon.
Speaker 3 (04:51):
Yeah, at the time, it couldn't have been worse.
Speaker 2 (04:53):
We acknowledged that, but our priority was to give farmers
and our shareholders the best option keeping Alliance as one
hundred percent farmer owned cooperative. Now they ultimately will vote
on that through livestock flow in the shorter term, and
some of them are very clear they don't want to
(05:15):
keep Alliance as a cooper, they don't want to put
more in. Many do, so that will work its way through.
Speaker 3 (05:21):
That's the farmer's choice.
Speaker 2 (05:22):
But meantime we have to look at external capital so
that we've always got an option to put back in
front of shareholders. Now, would you invest in a sheep
meat company? That's a million dollar question for or multimillion
dollar question probably for the new investors to work their
way through. But as we present it in our forty
(05:45):
two Woolshed meetings, there are two groups broadly that we
would see that would be interested. So one would be
food security investors looking to lock up or ensure secure
supply protein into the future. That would be group one,
And the second one would be a current needs player
(06:05):
looking to consolidate a portfolio to have a stronger offering
for their consumers around the world.
Speaker 1 (06:11):
Why not do our silver fir and farms get into
a hybrid or a joint venture operation.
Speaker 2 (06:17):
Well, I think that's certainly one of the realistic options.
We have again presented back to our shareholders that said,
if you back us, we will remain one hundred percent
farm our owned cooperative. If that doesn't work, then the
next option is some kind of a hybrid, joint venture,
or at the shareholders discretion entirely, they may decide to
(06:38):
sell us off one hundred percent. So those are the
three options that still are in front of us, and
it will be the shareholder's choice when we go back
out to them sometime around late July next year.
Speaker 1 (06:49):
Your agm is and gore on the eighteenth of December.
That could be a fiery meeting, Yes.
Speaker 3 (06:54):
It could.
Speaker 2 (06:56):
Look I don't mind fiery meetings. That shows passion and
and challenge. In fact, we had plenty of fiery meetings
in our forty US Woosheed meetings throughout till I September,
and look at it's our responsibility to give shareholders listening
to and understand their concerns and frustrations and make sure
(07:19):
that we address them as best we can inside the
strategy and the governance and the covenants that you have
as aboard. But look, I hope there's lots of questions
in Gore. Our result is what it is, but I
think we've pulled all the necessary leavers to set us
up for a successful future and return to profitability.
Speaker 1 (07:41):
Okay, final question for you, and this one will probably
be asked at the AGM and Gore on the eighteenth
of December. Was the Alliance Group grossly mismanaged under David Saveya,
the previous chief executive.
Speaker 3 (07:55):
No, I don't think so.
Speaker 2 (07:57):
Look, I think it's different, different requirements in different times.
We've entered two years of negative market pricing, which puts
massive stress on any business, and that's combined with at
the same time, we were required to invest capital in
both compliance through work safe legislation changes and landing our
(08:20):
ERP upgrade.
Speaker 3 (08:21):
So we've done those.
Speaker 2 (08:23):
We've now addressed our cost structure. We've addressed our manufacturing
surplus with the closure of Smithfield, We've addressed our farmer
facing issues, we've de risked China, we've massively reduced our
cost So I think different times require different strategies, and
we're a whole lot more agile and focused.
Speaker 3 (08:47):
Going forward.
Speaker 2 (08:47):
So we're looking forward to the year ahead with a
whole lot more confident in our teams.
Speaker 1 (08:53):
Of property right, and I've just got one more. This
one will turn up at the AGM as well. Are
there plant closures finished as smith Field the last of
the rationalization or eat as critical mass working against you?
Speaker 2 (09:06):
I know we're very comfortable now with our projected livestock
flows and our process and capacity installed. Longer term, who knows,
because the industry still has declining stock numbers, but from
an Alliance point of view, we're pretty comfortable. Our view
of the rest of the industry and others will make
(09:26):
their own decisions, is that there's probably another seven or
eight plants that need to change and close, particularly in
the ovine space. It's not over for the industry, but
we're comfortable. Will we sit right now?
Speaker 1 (09:38):
Good on you, Mark, when I know yesterday was a
tough day at the office. Thanks for some of your time,
Chair of the Alliance Group.
Speaker 3 (09:44):
Thanks so Amic
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