Wednesday, July 15, 2009

Silver Fern Farms money raising a thinly veiled glossover of Richmond fiasco

You have to feel for SFF shareholders. Now CEO Keith Cooper is asking them to stump up with $128 million, apparently in the name of forward progress in the UK consumer market.

Their hard fought co-operative, designed to protect their interests is fast becoming what they term a 'hybrid co-operative'. The translation for that is a co-operative moving away from what it was designed for and if this share restructuring goes ahead you would have to assume that it is only a matter of time before outside shareholders gain some status in the company, even if Cooper is promising that won't happen now.

But why do the restructuring in the first place?


First SFF tries to wrangle the money out of PGG Wrightson, now it's talking all this lovely juvely touchy feely rubbish about needing to be a 'fully integrated market-led company'. Come on, it all looks a bit desperate and more than a little co-incidental in the light of the lack of cash injection from the failed merger with PGG.

Wouldn't it be fantastic if the PR doctors just for once let go of the spin and spoke the honest truth. In SFF's case the statement would read something like this:
"SFF would like to advise that it is charging farmers an extra $128 million in shares and will be trying to find outside investors as well, due to the balls up it made several years ago when those in charge decided that SFF should buy Richmond at all costs. Because of this SFF has been in the poo financially for some time and as you know PGG Wrightson didn't end up joining the party so you, our loyal shareholders will have to foot the bill. But don't worry...we won't sell your co-operative rights down the road just yet...after all farmers are our business...and consumers...flashy UK consumers..."

Farmgirl hopes that SFF farmer shareholders voice their concerns over the restructuring as it is more than a little flawed.

It's funny isn't it how CEO's and directors are paid to go into a company and grow the business and make it financially stronger, yet end up making it bigger and weaker...think US companies answering to DC at the moment. The NZ example in agriculture is not as far apart from that as we might like to think...


Anonymous said...

Nice One - Not
Yet another spite filled load of trash from NZ's worst journalist
No solutions just mindless attack and rolling out the old tired cliche that big companies dont work

Anonymous said...

Whether you agree with Farm Girl or not she raises valid concerns in her articles.

Lets see if we can get some debate running re the notches on her belt,--Ravensdown--David Carter and Siver Fern Farms.

Sory but I cannot seem to get posts to your blog except by using
Anon, but will keep working on it.

Anonymous said...

The writer doesnt seem interested in debate. She is the one who is right and everyone else is wrong.
Hater & a Wrecker - comes to mind

Sally said...

Anonymous 9.12am & 9:45am

We are entitled to our views and Farm girl is expressing hers.

It would be good if anonymous would enlighten readers as to what actually makes Farm Girl a Hater & Wrecker.

Ed said...

Amateur, untrained, unqualified blogger who has swarmed over the internet pouring out columns of unsubstantiated “facts” and hysterical opinion.

These “citizen journalists” like Farmgirl don’t have access to decision makers and are infamous for their biased and inaccurate reporting on almost any subject under the sun (while invariably criticising professional news coverage whose original material they depend on to base their diatribes).

Anonymous said...

Looking forward to your next comments Farmgirl.Anon(comments 1&3
+ED) need to write facts not dribble.

Still having to sign as Anon.

doc said...

Looks like farmgirl is writing her own positive feedback! Nothing like positive self talk eh!

Farmgirl said...

Sorry don't have the time nor the inclination to leave comments about myself on site!

To the others - loving the discussion as long as it is a discussion rather than just going on about Farmgirl this and Farmgirl that. Love to see some facts about your thoughts on the issue rather than thoughts about me.
I am a farmer first and foremost. Please keep that in mind when you're posting about journalists as I've written as a concerned farmer and I have the best interests of the future of my industry and peers at heart.

Mac said...

Then dont list yourself as a journalist - perhaps world president elect would sound better

Anonymous said...



The proposal’s outcome is to disconnect SFF suppliers from 100% ownership of their co-operative.

The proposal is seeking further capital from shareholders who may already have their full quota.

It should instead inspire existing and new suppliers that are currently non-shareholders to share-up and gain rewards through committing supply of livestock for the “plate to pasture “ initiatives.

It provides no easy pathway for new shareholders to gain entry to SFF, as the thresholds are lifted for minimum qualifying shares, as was available with supplier investment shares.

Share restructuring .
The board and senior management have been pre-occupied with restructuring and failed to communicate effectively with all suppliers and non-supplying shareholders, and means that the “rightsizing” is really “downsizing” that includes a significant loss of EU quota.

The proposal elevates supplier investment shares that cost 90 cents to equal status of rebate shares of $1 accumulated from retained rebates. Non-shareholders need valuing by SFF, but conversely they also need to see value in SFF share ownership.

A co-op that reneges on redeeming shares and abandons their retiring shareholders to the NZX is no longer an enduring co-operative.

Directors have given no explanation on the impact on SFF if the medium term value of shares decline below nominal value.

No reason has been offered why a $1 per stock unit supplier investment share was unacceptable last year, yet the proposal intends deducting $2 per stock unit for share purchases this year and that is acceptable.

The board is responsible for not maintaining positive and rewarding relationships with past shareholders/suppliers, who have deserted and taken their supply to other processors.

Committed stock supply drives SFF and the comparative performance of SFF drives that commitment. It is access to and performance of processors, that determines the value of farmer’s assets in land and livestock.

SFF is poised to perform driven by an improved balance sheet, restored equity and the introduction of the X-ray imaging technology (market value traceability system) that will attract producers of premium stock for processing for the high-value fresh meat global markets.

Co-operative restructure.
A hybrid co-op is a doomed co-op as hybrids likely last in their transitional form for less than 10 years.

There is no explanation or detail of actual joint-venture or non-core business partners that will be developed at the board’s discretion in future, with no shareholder consultation.

Relationships can be established with all manner of joint-venture and non-core businesses without “prostituting” the co-op to entities unknown to shareholders.

Such partners will be “gifted” a share into an exceptional co-operative that is about to put the difficult years behind it following the acquisition of Richmond.

Security of ownership is a cornerstone of a pure co-operative and directors should bring new partners aboard on a case by case basis via the consultation process.

Anonymous said...

Remaining info on farmer facts re SFF proposals

Capital restructuring.
The proposal does not elaborate on the appropriation of the capital raised and the board needs to convince farmers where the money is intended to be spent.

No satisfactory layout of the ingoing costs, of the areas of expenditure proposed, accompanies the mail-out. Consequently missing is the options available in consideration of the expenditure, be that equity, borrowing or retained profits and which balance serves the proposal best with regard to the cost of servicing debt.

Given the improvement in equity and profit, the case for providing some of the requirements from retention of current and future profits is not stated.

It also has not conveyed to shareholders what a satisfactory level of equity is. They should now know what an unsatisfactory level was.

If SFF’s equity is on track to (again) exceed 50% it is far more bankable than the board is conveying to shareholders.

The board has to encourage the non-shareholding suppliers of the benefits of co-op membership by performance.

Distribution of profits. SFF proposes to pay dividends for possibly the first time in their history.
Farmers voting know any dividends will come from disbursements previously distributed as rebate,
schedule or contract payments.

Profits currently belong to farmer shareholders.

Raise your hands, those who now wish half of last years profit had gone to a corporate shareholder such as PGW.

Summary. Where is an example of the proposed hybrid model working? There isn’t any.

Where is it proven that expertise in strategy, finance and marketing has to come as independent directors and not on an as required, contractual basis on short or long term tenure, reporting to the board and meeting the constantly changing needs of SFF. There isn’t.

Has PPCS/SFF made the fantastic progress to date because of the quality of past farmer directors or in spite of them? Yes / Both.
Who actually believes 5 farmer elected directors will perform better than 10? Do you?

Will independent directors have the passion and investment as their farmer director counterparts? No.
Will they have the same respect for the real owners of SFF or will they work for the new investors whose interest is only their shares? No. That’s proven already.

Will the proposal encourage the uptake of shares by non-shareholding suppliers? No.

Why do constitutional changes presently require consent of 75 % of eligible voting shareholders?
Answer, they need to.
Then don’t vote a proposal that reduces that threshold to just over 50% of farmer consent.

Shareholders should consider voting NO to this proposal if they agree.
Chairman, Mr Garden said during the PGW proposal there was no Plan B yet under Plan B the equity of SFF will rise from 42% to 54% in 12 months.
This proposal will allow 40% of profits to go to non-farmer investors.

Only those that support an agenda to slash farmer control of SFF to 60% will support this proposal.

This is your co-operative, do you want to own it or not?

The capital raising can be achieved within the existing constitution, and don’t let Chairman Mr Garden tell you otherwise!


This advert authorised by the “SFF – 100% FARMER OWNED” - shareholders committee

Not A Queen St Farmer said...

SFF Proposal

For your information the proposal :

Is a three step proposal, capital from shareholders, from non-shareholder suppliers, lastly from equity/corporate sources.

It is a three vote proposal: capital raising, share restructuring and lastly board room/director reform.

Yet the SFF board is giving one vote

That this board believes this current process is consultation, they are in fairy land.

Farmers vote with their stock to their processor of choice, one that listens, work with their suppliers not contrary to them.

Explain why SFF needs capital now, yet survived the last 5 years and dragged equity from 25% to 54%.with the capital they had.

Lastly tell me just who owns the retained earnings and reserves assessed at $264 million.at31 may/09, isn't it current shareholders?

The current proposal will transfer ownership to supply investment shareholders, joint-venture interests and noncore business partners

for $1 or $1.40a share

Had the share restructure proposal started with dispersing these reserves by a 2 for 1 bonus issue to your long-suffering rebate shareholders it would have some credibility.

French Farmer said...

Silver Fern Farms has been an exceptional success story, bogged down since 2004 paying for Richmond. With that behind them, the improvement in equity to 54%, and projected profit streams, SFF is poised to again return to the best processors in NZ, adding value and returning profits as rebates, to shareholder suppliers.

French Farmer said...

How many ways do you need to be told, the NI supplies half the stock to SFF, start putting in half the Capital and stop supporting every opportunity to sell off the 100% farmer owned and controlled co-op to, in this case unidentified joint-venture and non-core business partners.

It is your and your fellow farmers capital that is needed not some corporate's.

Joe Farmer said...

Chalkie is way out of her depth saying SFF needs capital.

Problem 1 she could acknowledge where SFF has come from in the past 60 years, yes nothing to $2 billion turnover, that's not with sharing profits with shiny arses either, think we are stupid.

Problem 2 Chalkie, understand this co-op returns profits via schedule payments, contracts, rebates to supplier / shareholders not to shiny arses as dividends, not stupid again.

SFF’s equity is 54% at this years end. Go pick on a corporate like PGW if you want to talk equity.

Richmond is repaid, SFF's equity is gaining, good prospects, new technology installed, SFF is set to return to the best performing processor in NZ, call that a night mare??

AFFCO is a great example of a Co-op whose shares plummeted so low they got cherry-picked by green, Spencer and Tallys.

Chalkie, regard SFF as an extension of supplier/shareholders farms, it's privately owned, it retains profits for suppliers, it is none of your business.

Don't want to invest in SFF, great, we wouldn't want your money or share our profits with you,

All the other drivel on how a board should look and going to the NZX etc is irrelevant.

Our farm enterprises have good value on the back of having access to a meat processor, in this case a Co-op.

The share value is irrelevant and subordinate to the value of land and stock.

Only directors that understand that need apply, directors that only see the company performance in share value can stay in their corporate world.

Spending too much time alone? Thank God for that.



Anonymous said...

The reasons given in the previous comments give well thought out reasons for voting against the proposals put forward by the Silver Fern Board.

Looking forward to robust debate during the Gore meeting.


Anonymous said...

Overall Silver Fern Farms have developed and performed well over the 60 odd years in business.

As with Fonterra they will probably have their proposals to shareholders rejected.

Anonymous said...

So ---- SCF's joins the ranks of all other meat companies in NZ (except for Lowe Walker) who have gone down the tube due to doppy leadership. Well actually SCF havent gone yet - but are in the last struggles. Below is a full and comprehensive list of all NZ meat prcessing companies who have gone public and their shares have done well for their owners:

1. Ahhhh...
2. ....uuuuMmmm...
... sorry - there are none.

Fools they are for buying Richmonds - they were a different model from PPCS.