There's no denying the 2022-23 financial year has been challenging for WA's sheep industry on many fronts.
However, despite the depressed global lamb and sheep markets, WAMMCO International was able to record its second most profitable season in history.
A pre-tax net profit (before pool bonus) of A$43.1 million was recorded for the 2022-23 financial year, which came from a consolidated turnover of $471m - down 5.5pc on last year.
WAMMCO chief executive Coll MacRury, who addressed the co-operative's annual general meeting at Katanning last week, said it was very pleasing given all the hardwork and capital invested to deliver outstanding performance.
Mr MacRury said a record processing combination was achieved between both the Katanning and Goulburn plants of just over two million stock units for the year.
This was a credit to the co-operative and its staff, who worked around the clock, to process a backlog of old season lambs caused by skilled labour shortages during the COVID winter months.
"We ended up having to process the old season lambs longer than we wanted, but we also had to look after our members," Mr MacRury said.
"That meant we were under pressure all the way through the season.
"By the end of May we were right on top of things again, but it was a challenge for everyone.
"We worked massive amounts of overtime and even sent livestock to Goulburn in the spring to try and ease the situation in the west.
"The 2022-23 season was the first-time WAMMCO had ever processed more than one million head."
Mr MacRury said this window of opportunity had not been available this season, as the WAMMCO Goulburn plant now faced its own challenges in an oversupply of stock.
He said a number of new processing records had been reached at Katanning in the past month alone, with 4000 lambs plus 1000 mutton being processed on average per day.
This year's strong profit result allowed WAMMCO to pay its members a pool bonus of $8.3m last financial year, which took the total bonuses paid in the past 10 years to $39.55m.
The bonus equated to 60 cents per kilogram for qualifying lambs and 30c/kg for qualifying mutton.
Mr MacRury said the board and management determined it was important to reward loyal shareholders, given its consistent financial performance.
"The payout is well-deserved for the co-operative's loyal shareholders, who committed their quality stock to WAMMCO during the financial year," he said.
"WAMMCO continues to innovate in international markets and also develop world-class food processing plants that deliver superior lamb products to national and international markets.
"Ongoing success and profits can only be achieved with the ongoing support of our producer members."
WAMMCO held firm and delivered shareholders at least $6/kg for lamb through the tough winter months as the revenues worldwide were in free fall and paying an average price of $168.60 per head of lamb and $101.26 per head of mutton over the entire season.
With the bonus included, the average price paid by WAMMCO for lamb rose to $183.25/head or 751c/kg dressed, again back on last year's record highs, however still very strong.
Once again WAMMCO's major investment in North America through the lamb co-operative model proved beneficial, facilitated by solid retail sales throughout the season.
The model continued to drive revenue on top-end cuts in 2022-23, with Mr MacRury saying the investment was vital in allowing the co-operative to stay ahead of the game when it came to high-end revenue.
"Our three value-added processing plants in North America were fully operational, and this enabled us to react and respond to our customers'/supermarkets' requests efficiently," he said.
"With our ratio of sales over the past 12 months swinging back to 60pc supermarket trade and 40pc food service, we now see a real opportunity to grow lamb sales even further in this very strategic region.
"The less expensive lamb will also open up opportunities for new consumer purchasers of our products, which will be a positive as we work hard to entice more North Americans to consume lamb."
Fortunately, the previous two seasons' major logistical issues - around shipping and airfreighting capacity on the west coast - slowly improved as the season went on.
The co-operative did continue to truck some chilled sea freight to the east coast to meet key North American customer needs, however it was much improved when compared to 2020-22 seasons.
Some clients also required weekly airfreight deliveries of chilled lamb cuts, which was made easier with increased airfreight capacity returning to Perth.
Mr MacRury said the new season started with huge numbers of lamb and mutton available to process - this helped to produce strong financial performances through the spring.
"As we came to the end of calendar year 2022 international markets started to show signs of softening," he said.
"This was largely due to high inflation rates which lead to ever increasing bank borrowing rates worldwide.
"Adding to this issue from early 2023 was the huge amount of frozen lamb and mutton inventory sitting in onshore and offshore cool stores.
"These factors led to a quickfire market deterioration from early 2023."
Mr MacRury said the strong and consistent levels of livestock through the 12-month period were vital to the Katanning plant's efficient and successful operations throughout the season.
He said Katanning completed large amounts of overtime during the peak periods of the season, processing all compulsory Saturdays and weekly overtime prior to Christmas.
"Following Christmas we also were able to work a handful of voluntary Saturdays and maintained weekly overtime throughout the season," Mr MacRury said.
"This helped offset some pressure on producers and meant the co-operative was at maximum processing levels for the entire season."
Mr MacRury added, "the Katanning plant was able to quickly lock in new overseas workforce in the early part of the 2022-23 season and this helped keep processing numbers at very strong levels throughout the season".
This year saw WAMMCO purchase the Jumbuck Motel in Katanning as accommodation for maintenance contractors and staff.
Given the co-operative's plans to lift processing numbers further in the future, they are continuing plans to build a new accommodation block and are currently working with the Katanning Shire and several consultants to receive final approval on building some new accommodation on the fringe of town.
Building is expected to get underway in 2024.
Mr MacRury said the dual x-ray absorptiometry (DEXA) carcase measurement system had been operational at Katanning all season and WAMMCO were now receiving very useful data from the system.
"Most of the technical issues have now been ironed out - WAMMCO supply development manager Rob Davidson and teams of Murdoch University staff have continued to develop the DEXA algorithms to deliver the most meaningful information for our production and marketing teams as well as interested producers.
"Both the Katanning and Goulburn plants have major projects in the pipeline and we are currently working with third party contractors to set timelines on these projects," he said.
"All of these projects will add major value to the overall business which is vital as we move forward into the future."
Taking a look at the season ahead, Mr MacRury expects there will be strong numbers of lambs to process in WA again.
He said WAMMCO would push forward with further major investment in the WA sheep and lamb industry over the next few years to lift processing numbers.
That is through the introduction of new technology combined with the addition of new freezer and cold chain capacity.
Technology includes a new processing chain, which will run parallel to the current chain in the old beef slaughter floor.
The 600-head per hour chain has the potential to increase throughput by 2500 to 3000-head per day.
Mr MacRury said it would have the capability to process heavier rams and heavy mutton, which the co-operative has struggled to put through in the past.
"With that we are obviously going to need extra freezing capacity," he said.
"We are also going to add cold chain holding capacity.
"This will give us another 33pc holding capacity compared to what we have today."
In Goulburn, WAMMCO will also be working on adding extra carton holding capacity, installing a new rendering system and increasing the chain's speed.
This would allow the co-operative to move the plant's processing capacity to 14 animals per minute - one of the fastest in Australia.
As world markets focus on their recovery from major economic slowdowns, Mr MacRury expects a challenging 2023-24 season.
He said as prices had hit a low in the past three to four months, the co-operative was holding its own and hoping to see some improvements in 2023-24.
"With what is happening in the world at the moment, there is a lot of uncertainty, and I can't stand here today and say things are definitely going to improve by May.
"However, the general feeling is as we get through this current season we will see some light at the end of the tunnel.
"Looking forward we believe pricing pressures will remain for a little while.
"There's a good supply of lamb and mutton in the market - there will be some pressure right through."
Despite this Mr MacRury said the future was bright and WAMMCO was backing it 100pc.
"We want to be able to kill 7500 lambs and mutton per day at Katanning," he said.
"We are going to do it, it's not a pipe dream, it is going to happen and it is going to happen in the next 18 months to two years.
"When shareholders want their lambs killed we are going to be able to kill them.
"We are going to put our money where our mouth is and get the job done."
Also at the AGM, Tom Lynch, Hyden, was re-elected a producer director.
