AFFCO profit more than halved - tough times ahead

AFFCO profit more than halved - tough times ahead

Nov. 26 (BusinessWire) - AFFCO Holdings Ltd, the meat processing company, has reported a 57.9% drop in net profit to $25.37 million for the year to September 30 and is cancelling its final dividend because of uncertain times ahead.

The result was achieved on almost static revenues of $1.103 billion, down just 1.4% on the previous year, but periods of low and sometimes negative margins were experienced particularly in the second half of the financial year.

"The impact of the global financial crisis and lower livestock throughputs presented volatile and challenging conditions, which particularly trying for the company management," AFFCO said in a brief statement to the NZX.

"Fortunately, the considerable upgrading at plant level has been providing continuing processing efficiencies, enabling the company to maintain a positive profit and a secure balance shett."

Additional marketing capacity has been added in export markets to try and boost sales, as the company looks to a "tougher livestock flows" in the new season.

"Whilst market returns are at reasonable levels historically, the strong New Zealand dollar will impact on returns for the business and our suppliers in the new season."

Poor margins are expected to continue to have an impact on the current financial year's result.

"The board is adopting a cautious approach to prospects for the 2010 year in view of the volatile global economic outlook and as a result no dividend is recommended," the company said.

AFFCO shares were unchanged in trading today, at 37 cents apiece.

The result represents basic earnings per share of 5.02 cents, and a 7.44% return on equity. The balance sheet is conservatively geared at a debt to equity ratio of 27.37%, and the accounts show debt repayments during the year of $122.2 million.

(BusinessWire) 18:07:09

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