The Country 31/03/25: Dan Boulton talks to Jamie Mackay

Silver Fern Farms has remained in the red, with a recovery in red meat prices coming too late to offset increased procurement tensions. The chief executive of Silver Fern Farms talks about another challenging year for our biggest meat company, with the Silver Fern Farms Co-operative posting a $10.9 million loss after tax. Silver Fern Farms Limited (the operating company) has posted a $21.8 million loss after tax, with revenue decreasing $144 million from the previous year to $2.64 billion.

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Episode Transcript

Speaker 1 (00:00):
Dan Bolton is the chief executive of silver Fern Farms. Well,
they've come out with their annual results this morning, so
the co op has posted a ten point nine million
dollar loss after tax. Silver Fern Farms Limited the operating
business at twenty one point eight million dollar loss after tax. Dan,
when we compare these two financial year twenty twenty three,

(00:23):
it's almost copy and paste, no real improvement.

Speaker 2 (00:27):
Yeah, I'm clearly disappointing Gamie for a second year of
a loss, particularly at a time where today we've got
near record market pricing and record farm gate pricing. But
you know, last year was a game of two half.
That's the way I describe it. You know, back in
January twenty twenty four, market pricings were pretty depressed, all

(00:48):
but interesting. In the first half, we had really good
livestock volumes and good process and efficiencies and they were
pretty much offsetting some of that week pricing. And midyear
we're tracking okay. But we also knew that, you know,
it's forecasted to be a difficult back half of the
year with projected lower livestock volumes, and we saw that,
particularly on beef. But what we probably did and what

(01:09):
we did under estimate is just the level of procurement
tension that occurred through the back half of the last
the last year, and I think, you know, that was
a real challenge for us. You know, all the market
upside that we saw come through in the back half
of the year was pretty much all being paid out
that out to farmers just due to the competitive nature.
And you know, that's grateful farmers, and you know, we

(01:30):
don't begrudge them for that, and they've enjoyed some excellent
pricing through the back half of that last year. And
and you know, the other great thing about that is
it's also been rebuilding confidence in the sector. You know,
we've seen farmers now telling me that the fun is
now back in farming, and that's that's great to hear.
And I know some farmers that're depending on when they
process lifestock had a record year last year. And that's

(01:51):
great for rural communities because we're seeing spending come back in.
But a challenging sort of a game of two halfs
of civil things.

Speaker 1 (01:57):
Yeah, okay, Dan, are you as a co op are
you a like Fonterra. If the price of the raw
ingredients lower, I paying the farmers a bit less, it's
easier to make a profit.

Speaker 2 (02:09):
No, I guess there's an element to getting that balance
between what you pay at farm gate and what we
hold onto into our part of the business is critically important.
You know for processes to make money means we can
invest in the market, we can invest in technology and automation,
processing efficiency in that is all really really important. So
when we don't make money, that's actually not good for

(02:30):
our farmers in the long term. So you know, that
procurement nature and the tension that we saw last year
was probably the most aggressive I've seen in my eight
years in the industry. So that's not sustainable. But the
good news is as we step into tween twenty five,
things are more normalized and we're seeing we're seeing that
profit margin more equitably shared across the supply chain, which

(02:50):
is really important.

Speaker 1 (02:51):
I note after two years of losses that your equities
dropped by fifteen percent does for instance, and I know
the Alliance Group, Scott it's financial issues. You're the other
big player in the market. No danger, Dan Bolton of
a run on the bank.

Speaker 2 (03:06):
No, no, we've actually just completed our refinancing on the
back half of twenty twenty four and we've we've got
a good working capital facility approved out to twenty twenty six,
so we're in good shape there with good support from
the syndicate. But you know, two years of losses makes
it makes it a bit tougher. But you know, there's
been a significant focus on the business around you know,

(03:27):
laser focus on cost and operating efficiencies and I'm really
pleased with the work that's gone into the business and
that's really start to pay dividends as we step into
twenty twenty five and fee to say, last year's result
would have been a lot worse if we didn't do that.

Speaker 1 (03:40):
Hey, good returns at the moment for red meat record
prices for beef lambs really improved on where it was
twelve months ago. But is the red meat industry and
danger of running out a critical mass?

Speaker 2 (03:55):
I mean, volumes well interesting the first half the last
year volumes of very favor well, So it was more
about the timing and the alignment to capacity. That's where
we've been challenged. But you know, I think the future
is really bright for our farmers. You know, I see
that demand for what we'd have here in New Zealand's
going to outstrip supply. I think that's going to continue
to bring value back into our sector. And I think

(04:17):
we're in a period of a growth mindset and we
need to rebuild confidence to get our farmers back on
the land farming for the next generations. And I think
the future is bright. And so my view is I
don't accept we're going to continue to see a decline,
you know. I want to see our stabilizing and actually
grow value into our sector.

Speaker 1 (04:37):
Okay, let's just finish with the elephant in the room
this week. What is he calling it Salvation Day or
something like that? Trump and his tariff announcements on April
to second. I think that's what Thursday out time we
will know what.

Speaker 2 (04:49):
Is up to.

Speaker 1 (04:50):
But I note in February from the Meat Industry Association
Dan Bolton that the United States was our largest export market,
increasing by thirty two percent and year on. Here it's
such a massive market for US. Whichever way Trump slices
and dice, is this tariff announcement it's not going to
be good for us? Or are there opportunities?

Speaker 2 (05:13):
And clearly this week's going to be interesting how that
plays out as we move towards the second of April, Jamie,
and I think there's going to be some choppy waters
as their announcements come out, and we've been doing a
lot of scenario planning around how we sort of navigate
that period. And I think whether it's a direct tariff
on New Zealand or an indirect one impact as another

(05:36):
large exporter into the US moves volume into one of
our other key markets, means that their pricing could swing
quite dramatically. So there's a little bit of unpredictability that's
coming out of the US at this point in time,
but we're prepared for it. We have to be agile.
But also you said there's potentially opportunities because I think
New Zealand's well placed compared to other nations, that we

(05:57):
need to make sure that we capitalize on the up
side that may come out of this as well. And
I think, you know, you know, just planning for those scenarios,
leveraging all our key markets. You know, we export to
sixty markets. We've proven to be agile and moved quickly
in terms of moving volumes into different markets when things happen.
But you know, we can't ignore global demand for protein
isn't going to go away. And there might be some

(06:19):
choppy waters as it all settles out, but long term,
you know, I think the demand for what we have
is still going to remain positive, and there's some positive
pricings with our farmers.

Speaker 1 (06:28):
And when it comes to red meat, there is no
finer product than lamb. Hey, Dan Bolton, the chief executive
of Silver Fad Farms, thanks for your time today in
the country.

Speaker 2 (06:37):
EXS timely