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Silverstream To Restructure Its Operations

PRESS RELEASE 17 July 2008

Silverstream To Restructure Its Operations Following Sale And Lease Back

Silver Fern Farms has reached agreement for the sale and partial lease back of its Silverstream processing facility near Mosgiel, outside Dunedin. The plant, which processes and packages lamb products from other Silver Fern Farm plants, is being acquired by Christchurch based Scales Group for an undisclosed price. Polarcold Stores Limited, which is part of the Scales Group, will operate the cold stores on the site.

In tandem with the sale and partial lease back, Silver Fern Farms will scale back certain operations, with various functions consolidated within the site. This will result in a reduction in permanent staff required on the site and will also mean the company will be looking for a lower number of replacement process workers in the coming season.

Silver Fern Farms Chief Executive Keith Cooper says the company will lease the office block, PR1, PR2, rendering and other workshops and amenities in order to continue processing at the site. “The transaction is part of the company’s ongoing ‘Rightsizing’ project, aimed at aligning processing capacity to supply and providing long term sustainability to the business and improving returns to farmer shareholders.”

Mr Cooper says employees at Silverstream have been advised of the plant sale and the proposal to reconfigure the operation. “The decision to sell the site and close part of its operations follows exhaustive review of our operations and capabilities in light of the overall decline in sheep and lamb numbers. We haven’t taken the decision lightly, and we recognise that our actions will have an impact on certain employees.”

He says while it’s ‘business as usual’ for the remainder of the plant, as with other plant rationalisations, every practical effort would be made to assist those affected employees through change and offer alternative employment at other processing facilities where vacancies exist.

“From an operational perspective the transaction is a normal business decision. We are involved in the business of meat marketing and processing, and not in land ownership. Where we can realise value in operations that are not positioned for long term returns, we will do so to the benefit of our supplier shareholders.”

Mr Cooper says operations are being geared up at other South Island plants to ensure self sufficiency, which will result in increased efficiencies long term and cost savings that are currently being incurred from the transport of carcasses off site to Silverstream.

“We are also acutely aware of the fact that forecasts for sheep and lamb supply are showing that there will be as many as three million less sheep and lambs in the South Island next year alone,” he adds.

- Ends -

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