Richmond is back on track

May 19 2004

Richmond is back on track to deliver full year profit target despite a disappointing half year profit result

An extremely challenging start to the season has resulted in Richmond today announcing an after tax profit of $433,000 for the six months to March 31, 2004.

Chief Executive Officer Richard Carver said Richmond is disappointed with the half-year result, which was impacted by the issues detailed in this announcement.

The rising New Zealand dollar, increased competition and additional capacity in the lower North Island has adversely impacted both the volume and margins of Richmond’s sheepmeats business. Adding to this, the East Coast storms in spring resulting in lamb losses of approximately 0.5 million and the severe flooding in February significantly eroded Richmond’s profit for the first half of the season.

The February flooding resulted in both interruption and damage to Richmond operations in Hastings, Takapau, Oringi, Waitotara and Shannon.

Our plant at Waitotara was closed for two months following closure of the access bridge. Re-instatement work at the Shannon fellmongery, which suffered the worst damage, is progressing well and the plant is due to reopen during June, after being out of action for nearly four months.

The Company carries comprehensive business interruption and material damage insurance and is working closely with its insurers.

Total Revenue was $589.7 million, an 11 percent drop on the previous half year’s $663.3 million.

The result compares to a $14.2 million (after tax profit) for the same period last year, when the company was processing at record levels due to the climatic conditions.

Included within the half-year result are one off net costs in relation to business restructuring, shareholder litigation and an insurance deductible of $1million following the storm damage. This is partially offset by the $1million profit from the sale of Richmond’s Awatoto Plant.

Mr Carver said the half-year result was below budget. However, Richmond has undertaken a number of significant initiatives to improve underlying company performance. These initiatives will have a major impact on performance in the second half of the year.

“The company has turned the page on a difficult six months. Richmond has delivered strong results in March and April,” Mr Carver said.

Mr Carver said the company has now announced it is back on track to achieving its year-end profit target and in excess of this target for the eleven-month period to 31 August 2004, following Richmond's change in balance date.

Reporting on the first six months, Mr Carver said the delayed timing of the peak season together with continued focus on working capital levels has resulted in an overall reduction in net working capital of $33.6m.

Bank borrowings and capital notes are shown as current liabilities. The company is developing a long-term funding strategy, which includes the capital notes and is currently in discussion with its bankers.

During March PPCS’s shareholding was ratified at 63% and both companies have commenced work on lifting the returns through combined synergies.

The Richmond Board has resolved not to declare a dividend.

ENDS

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