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Operations To Be Trimmed At Canterbury Plant

22 July 2008

Operations To Be Trimmed At Canterbury Plant

Silver Fern Farms has proposed to close the sheep and lamb slaughter processing portion of its operation at the Canterbury processing plant near Christchurch.

The proposal to shut down the two slaughter chains, which was communicated to staff at the plant today (22 July 2008), would impact on a total of 225 processing and 24 administration and maintenance positions, though there were approximately 70 redeployment opportunities at the Canterbury lamb cutting operation and the nearby Islington and Belfast plants. Canterbury employs as many as 450 staff at peak of season.

Keith Cooper, Silver Fern Farms Chief Executive, says the closure of the slaughter operations was the final instalment of its ‘Project Rightsize’ for 2008, a programme which was designed to align processing capacity with supply, enhance financial performance, and re-position the business as a true marketing organisation under the Silver Fern brand.

“It reflects the overall decline in South Island sheep and lamb numbers, which are expected to drop by an estimated 2.2 million units next year, as conversions in traditional sheep and lamb farming areas to dairy and alternate land uses translates into lower stock units."

Mr Cooper says Silver Fern projections are broadly aligned with Meat and Wool Economic Service forecasts that signal an overall reduction in livestock over at least the next three years.

“There were also specific issues that make the slaughter processing operation at Canterbury less tenable than other processing options.

”These include the requirement for significant capital investment in effluent management systems, environmental upgrading, and limited development options compared to other key sites. The proximity to residential zoning also contributed to the decision."

Mr Cooper says the processor’s boning room facilities would continue to operate as usual, as the company needed to retain its processing capability to meet increased demand for chilled product across the business.

“This has not been an easy decision, nor is it a reflection on the capabilities, efficiencies or productivity of our Canterbury team. Rather we are taking hard decisions now in regard to the security of our business, ensuring we are an important part of the economic landscape well into the future."

Mr Cooper says while no further closures are planned, all operations are subject to ongoing review based on site economics, and productivity/efficiency outcomes.

With this proposal, Silver Farm Farms would have reduced the number of full operating sites by six, with lamb capacity reduced by five chains. Since February 2007 the company has reduced debt by $150 million.

“These decisive actions, coupled to the proposed partnership with PGG Wrightson and commitment of additional capital of $220 million, should now address the concerns Alliance had with a merger last year and create the opportunity for Alliance to recommence merger discussions. This can only benefit suppliers to the two co-operatives,” says Mr Cooper.

Media Conference Call
Silver Fern Farms will host a conference call for news media in relation to this announcement, scheduled to begin today (22 July 2008) at 12:00pm. Keith Cooper will make a brief presentation and there will be the opportunity for questions.

To participate in the conference call, please dial 0800 447 081 PIN 523147#.


Background information on Silver Fern Farms Limited:

• Prior to 1 June 2008 Silver Fern Farms was known as PPCS, a leading New Zealand added-value meat exporter, which has operated from its head office in Dunedin since 1948

• It is responsible for around a third of New Zealand’s sheep meat and beef exports and around half of New Zealand’s venison exports

• Silver Fern Farms has nationwide presence, and processing coverage, and employs about 8,500 staff in the peak of the processing season

• It is a 100 per cent farmer-owned co-operative with about 20,000 farmer suppliers

• It has an annual turnover of approximately $1.8 billion

• Silver Fern Farms operates around a core tenet: to market quality New Zealand consumer products to the world by meeting the requirements of the end user, and to retain the resulting profits in New Zealand

• Silver Fern Farms has an international marketing network across the United Kingdom, European Union, the Middle East, Asia and the United States.

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