27 January 2010
MANAGING DIRECTOR''S ADDRESS
Thank you Mr Cole.
Last year I talked about an expectation of markets easing back from the
disruptions caused by the global financial crisis but expected that with an
exchange rate at that time of 53 to 54 cents that we should generate a
satisfactory return to shareholders. Who would have believed that the
exchange rate would again spike above 80 cents and remain consistently above
70 cents?
The final result for 2009 taking into account market conditions and exchange
rate volatility was satisfactory. Enhancing the operational performance over
the past two years has contributed to that satisfactory outcome. The crystal
ball that can predict future exchange rates has yet to be invented and will
never be when our exchange rate is not determined by the fundamental
economics of New Zealand as a country compared to other countries currencies
but by currency traders looking for safe havens to park large sums of money
for usually very short periods. A very small proportion of trades in New
Zealand dollars are related to the basic trading in international goods and
services. It is high time New Zealand as a country started earning some
income from these currency traders that costs shareholders in Sanford and
other trading companies many millions of dollars each year. A tax on non
trade related currency transactions could not only earn significant income
for the government it could also result in our exchange rate moving closer to
its realistic value and thereby add significant value to the wealth of New
Zealanders.
Since the end of financial year it is fair to say markets have been stable.
Markets for most species are lower than we would like and we are constantly
seeking to move price levels to those we were achieving in mid 2008.
Inventory levels that rose when the global financial crisis affected demand
are now slowly decreasing and we expect this trend to continue over the
coming year.
One strong focus this year is to stimulate demand for Greenshell Mussels with
present selling prices being uneconomical. In the United States we need to
reduce our reliance on the lower priced buffet markets and increase the
availability and demand from mainstream foodservice customers. Although we
market to more than 60 countries the USA remains the dominant market followed
by Korea. Opportunities in China will be explored with a consortium of New
Zealand companies. Being the largest farmer and processor of Greenshell
Mussels a small price increase can make a significant difference to our
profitability. The new automated North Island Mussel Processors Limited
(NIMPL) plant in Tauranga is currently under going commissioning trials and
full scale production will commence in the near future.
Across our operations we continue to seek improvements in performance in
terms of efficiency and technology. The new inshore trawler San Hikurangi has
performed up to expectations since it joined the fleet late last year. The
Big Picture Wine experience has not had the turnover expected and further
efforts will be made in the coming year to promote this attraction. Our
deepwater operations continue to be the most profitable part of our business
and with a sustainable resource with a good mix of quality assets we would
expect this to continue into the future. We continue to seek growth
opportunities for aquaculture and we are supportive of the call from
Federated Farmers to allow trout farming in New Zealand. Sanford would
immediately invest in trout farming if it was permitted in New Zealand. There
is no valid scientific argument that can be sustained against trout farming.
The arguments that were mounted many years ago objecting to salmon farming
have been proved groundless.
Catch volumes of skipjack tuna in the Pacific were in line with expectations
but prices trended lower that the previous years record. Despite this the
vessels still produced a satisfactory result and catches so far this year are
satisfactory. Future access and management measures in this fishery will be
challenging.
Profitability of the Weihai Dong Won Food plant in China continued to improve
as production volumes increased and margins were able to be improved. Since
balance date we have sold our holding in High Liner Foods Inc at around book
value and used the proceeds to reduce debt.
Outlook
We forecast that markets will remain challenging but gradually improving over
the coming year. The exchange rate will continue to be impossible to predict
but our efforts will continue to maximise prices and manage the exchange rate
risk. The major capital project for the coming year will be the automation of
our processing plant at Havelock which will be carried out in the latter part
of 2010 and will improve the profitability of that operation.
Operationally we are well positioned to achieve our catch and processing
targets and with an excellent team at Sanford ranging from fishing skippers
and crew, marine farm workers, fish and shellfish processing staff, and
administrative and management staff all committed to this industry and
delivering acceptable returns to Sanford shareholders.
E F Barratt
Managing Director
End CA:00190567 For:SAN Type:ADDRESS Time:2010-01-27:14:00:10