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Voluntary severances moves to improve performance

6 October 2008

Voluntary severances as CRI moves to improve its financial performance and reposition its science

AgResearch has entered the second phase of its Internal Review Process, with a call for voluntary severances amongst its scientific staff as the Institute works to improve its financial performance and reposition its scientific focus.

“We are downsizing our scientific staff complement and will review our corporate staff complement thereafter in order to ensure that we maintain sufficient profitability. We intend to save about $5 million of costs in this financial year, including already having reduced corporate operational expenditure by over $2 million. However, our overall saving target cannot be achieved without downsizing” said AgResearch Chief Executive Dr Andrew West.

“Our operating profit for the financial year ended 30 June 2008 was negligible. By taking these measures we anticipate a more satisfactory profit will be achieved in the current financial year. Thereafter the Institute plans to attain a 10% operating margin within three years, with this performance sustaining a significant level of reinvestment in commercialisation of scientific discoveries for the benefit of the pastoral sector” said Dr West.

As well as focusing on overall cost reduction, the Institute is also systematically increasing internal productivity and targeting approximately 8% annual revenue growth. Dr West says a number of key forces have recently combined requiring AgResearch to tighten its operations, including a significant downturn in two of its most important client industries (sheep and beef), the Institute’s long-term commitment to employing under-funded scientists and maintaining unfunded flocks and herds of rare animal genetics now exceeding its capacity to do so, and recent costs of commercialisation having exceeded budget.

“It is important to appreciate that AgResearch is deliberately increasing its costs in two areas. We have been and will continue to increase the pay of our scientists by an average, annual rate of 6.5% to ensure that their pay is competitive with other professions in New Zealand. Presently it lags by an average 15%. We also embarked on a steady and substantial rebuild of our laboratories in 2005. By December this year AgResearch will have commissioned close to $60 million of new labs and glasshouses with some welcome assistance from Massey University. All of the pay rises and most of the rebuilding is being funded internally. We are choosing to do this in order to maintain scientific and technological quality at international standards” said Dr West.

“Times like these are never easy for an organisation. Our focus now is to help our staff through difficult times and give them the support they need. While it is, without question, hard for staff the Institute will be in a stronger position moving forward and this will hopefully provide staff that remain more certainty for the future.”

Should the call for voluntary severances not produce sufficient savings then targeted reviews of scientific Groups will occur. AgResearch will then evaluate its corporate function (the order is important, as the size and shape of Corporate services will be determined by the needs of scientific Groups).

Voluntary severance applications opened on the 2nd of October and close on the 22nd, with results announced on the 31st .


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