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AFFCO Holdings Posts Stronger Second Half Result

AFFCO Holdings Posts Stronger Second Half Result

AFFCO Holdings Limited (AFF) has announced an after tax loss for the full 2001/2002 year (to 30 September 2002) of $12.3 million.

The company is heartened by a return to operating profit in the second half.

Six Months to 31 March 2002 Revenue $496.8M Operating Surplus (Deficit) Before Interest & Taxation ($10.7M)

Six Months to 30 September 2002 Revenue $495.1M Operating Surplus (Deficit) Before Interest & Taxation $4.4M

Full Year to 30 September 2002 Revenue $991.9M Operating Surplus (Deficit) Before Interest & Taxation ($6.4M)

Chairman Sam Lewis said the North Island meat processing company has come through a challenging year, with difficult trading conditions in the first half. The company's disappointing first half result had strengthened the company's resolve to permanently reduce cost structures and simplify business processes across all areas of its operations.

The full year result includes $2.8 million of non-recurring restructuring costs. These costs have been incurred as part of the company's strategy of achieving a simple and cost effective corporate structure. AFFCO said it is now seeing the benefits of the restructuring programme, including a turnaround in operating earnings in the second half of the year.

Operating revenues were $991.9 million, (down by $211 million on last year). The strengthening New Zealand dollar and softening international beef markets were key factors in the decline in revenue.

Cash management is an area in which AFFCO has made significant improvements. Cash on deposit at Balance Date was $36.6 million, up $26.2 million on the previous year. Total creditors were $40.3 million, a reduction of $31.7 million on 2001.

No dividend will be declared.

AFFCO Chairman said after a drawn out and difficult period, AFFCO is looking to the future with confidence.

"The restructuring process will culminate with the relocation of AFFCO's head office to Horotiu, near Hamilton in December 2002. When this process is completed, the numbers of staff employed in head office will have been reduced by two thirds compared with last year.

"With a greatly reduced fixed cost structure and nine strategically positioned plants, the company is now well placed to compete."

Mr Lewis also pointed to the capital restructuring initiatives undertaken at year's end, which he says have placed the company in a much stronger position.

"The success of the $27.1 million Rights Issue in September has been significant for the company, further strengthening its balance sheet, and providing it with greater working capital flexibility. It has positioned AFFCO well to successfully conclude an improved seasonal funding facility with its syndicate of banks.

AFFCO's Chief Executive Tony Egan said the company was now refocused on its core business.

"The relocation of the company's Head Office to Horotiu represents a watershed for AFFCO. After nearly 100 years in Auckland, the company has made the decision to position itself for the future in rural New Zealand.

"We have come a long way, but there is no room for complacency. We are committed to delivering a meaningful level of return to shareholders."

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