WAMMCO positive about lamb future

31 Oct, 2013 01:00 AM
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Dudley Wise (left), Mt Barker, Rod Madden, Morawa and Ben Taylor, Mt Barker, at the WAMMCO AGM.
Dudley Wise (left), Mt Barker, Rod Madden, Morawa and Ben Taylor, Mt Barker, at the WAMMCO AGM.

A $10.44 million record profit was announced at the WAMMCO International co-operative's annual general meeting held in Mt Barker last week.

But that was quickly overshadowed by angry members who questioned WAMMCO's management team about so-called under-funded shareholder rebates, unavailable kill space, unfair forward booking models and inappropriate payment levels for large and heavy animals.

WAMMCO and Southern Meats group chief executive Coll MacRury was forced to defend many of the company's moves and said despite voiced frustrations, the 40 cents a kilogram lamb and 20c/kg mutton rebates paid to producers in September and various other trade bonuses had returned nearly $7 million to growers' pockets since 2005.

He told members the 2011 acquisition of Southern Meats saw WAMMCO's turnover reach $210m in the 2012/13 financial year and deliver record rebates of $1.8m to all qualified members.

About two million stock units were processed by the two plants during the last financial year, despite poor export pricing and the high Australian dollar creating some problems during July and August of that period.

Mr MacRury said WAMMCO initially started on the back foot and the Southern Meats plant in Goulburn, New South Wales, kicked off the last financial year by targeting heavy mutton for the Chinese market which helped the entire company gain momentum after significant financial losses in the 2011/12 period.

After Christmas 2012 the world market picked up again and was in need of sheep meat products.

But the result of the New Zealand industry's record kill meant much of that product was dumped on the market in January, February and March of this year.

As the year progressed the Australian dollar dropped and WAMMCO saw a demand for chilled lamb from North America and the Middle Eastern markets.

This kick-started an upside and until July this year production forecasts were very strong for WAMMCO, including a record 20 Saturdays worked at the plant to keep up with demand.

But Mr MacRury also pointed to the downside. The new high dollar meant it became very difficult to pay scheduled prices to growers and the management of the company was shifted, so that WAMMCO could survive the period while remaining competitive with the other WA abattoirs.

"Market forces meant we were then able to get a good price for our farmer shareholders again," he said.

"A strong autumn and winter hadn't been seen in WA for a long time and when it did arrive the lambs were plentiful and it led to efficient processing.

"WAMMCO's Katanning plant was full every week right through to the July shut-down which meant processing costs were very good and contributed to the significant end result."

Mr MacRury also credited the world market for supporting the business through that period.

"We were able to secure a top chilled market for most of the lamb we processed," he said.

"Looking to the future, the markets remain fairly stable as does the Australian dollar."

He also said there were a number of other factors working in WAMMCO's favour for the current financial year.

A sizeable increase in WA lamb production through the months of October, November and December this year combined with the fact New Zealand's lamb kill was down about two million head on last season would help WAMMCO's pricing from March 2014 onward.

It terms of WAMMCO's main markets, the high value chilled markets in North America and Canada remained an extremely important outlet for the company's heavier lambs.

Mr MacRury said without those markets WAMMCO would fail to buy 23-24 kilogram lambs from WA producers.

The Middle Eastern market also remained integral to the Katanning plant because of its geographical proximity.

Mr MacRury said the Chinese market was also of increasing importance despite the ban it currently had on the importation of chilled Australian lamb and beef.

"There has been a major lift in demand for lower grade frozen cuts like flaps, trimmings, offal and tripes," he said.

"WAMMCO's ability to offload these types of products dictates how profitable the company is, especially when we're processing up to 22,000 animals a week."

In terms of capital re-investment, Mr MacRury told shareholders the co-op would spend close to $4m to replace the Katanning plant's freezers in the near future.

And it would also re-invest in technological advances that would help combat staff shortages at Katanning.

During the AGM a motion was also carried to increase the co-op's director fees by $20,000 to $260,000.

It was revealed there hadn't been an increase in two years or since Southern Meats was introduced to the business.

In light of the heightened workload for directors due to the acquisition of Southern Meats, 11 voted in favour and six voted against the change in spite of some concern from the floor that the 8.33 per cent increase over two years was too high.

Only one item of general business raised addressed the height of the ute and trailer access ramp at the Katanning plant.

The meeting was told action to rectify the problem would be taken.

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