Bonuses paid despite tough financial year

The pandemic affected the co-operative's international markets and in turn its operating results, but despite this it still provided bonuses to growers.

In the 2019/20 fiscal year it posted a net pre-tax loss of $2.8 million that came from a consolidated turnover of $323m after processing just short of 1.6 million stock units at Katanning and Goulburn, New South Wales.

While the co-operative recorded a net loss, WAMMCO chief executive Coll MacRury, who addressed the co-operative's annual general meeting at Katanning last week online from New Zealand, said although it was a disappointing result, in the circumstances it was acceptable.

"The loss was on the back of a very tough second half to the year as a result of COVID-19 where it was very difficult to move stock and sell product," Mr MacRury said,

"We started the year really strong and were going gangbusters up to Christmas and then COVID-19 hit.

"Katanning had very strong livestock throughputs for the first seven months of the season and then COVID-19 struck in early 2020 and livestock supply had to be carefully allocated to the best market options and customers who could pay as we entered this tumultuous period.

"I think we did very well to hold our markets and move lambs around given the situation.

"We also had the issues around Goulburn where we didn't have the Chinese licence for the first six months of the season and when we got it back it was right on the back of COVID, so we had to manipulate the kill there quite significantly through the year as well."

Despite the loss WAMMCO still paid a pool bonus of $2m last financial year to its members, which brought the total bonuses paid in the past seven years to $20.850m.

The bonuses last year equated to 20 cents a kilogram for qualifying lambs and 10c/kg for qualifying mutton.

Mr MacRury said given the first six months of the year had been outstanding and after years of good processing, marketing and operations, they felt it was still very important to give members a pool bonus.

"In other good news for WA farmers our average price paid for lamb last season bonus inclusive was $7.59/kg," Mr MacRury said.

"This is a massive increase on what it has ever been and a definite record price," he said.

Mr MacRury said managing stock supply to satisfy shareholders versus the market opportunities was vital last year and proved a very difficult once COVID-19 struck.

"Damien Giumelli and his team did a great job in a very testing period from February onwards," he said.

"We really were under pressure, world markets crashed and the food service industry totally collapsed overnight.

"As a result the only real option we were left with was to move as much bulk product as we could into China at much lower levels than we had been getting or move as much of the food service sector/top end cuts into our retail sector and our investment in North America played a huge part in us being able to get through this period.

"Most other operators did struggle with moving stock."

World shipping also presented huge issues for WAMMCO, as shipping lines clogged up and this crested major issues for chilled lamb shelf life in its key markets.

"We got through fairly unscathed, many operators on the east coast have had a bloodbath in the past 12 months," Mr MacRury said.

"We were lucky and have been able to reap the rewards of our extensive market investments while many other meat companies have battled in this unprecedented COVID market environment.

"Our investment in the Lamb Company certainly paid dividends last year and has been a god-send in these unprecedented times."

When it came to its workforce facilities, Mr MacRury said the Katanning workforce enjoyed very strong work cycles with large amounts of overtime worked until January 2020 with 14 to 15 Saturdays worked while the Goulburn processing numbers had to be very carefully managed throughout the entire season.

"We also continue to pass all the health and safety audits at both plants and these are getting tougher and tougher," Mr MacRury said.

"Both plants are continuing to be upgraded and developed and both are right up with world class standards."

It has seen big increases in throughput at Katanning and it has been working on that in the past few seasons through plant development and worker incentives.

Mr MacRury said they had built new extensions which had allowed them to increase the lamb program in the past 12-18 months.

"With the new mutton room we have also put in, we can now really use the lamb room to do solely lamb and as result we have seen some real lifts," he said.

"In conjunction with this we have developed some worker incentives around lifting numbers.

"We are now processing about 600 to 700 head more lambs per day which is significant in the current environment."

The installation of the DEXA X-Ray unit at Katanning continues to be an ongoing issue for WAMMCO and it has been delayed again this time because of COVID-19.

The unit is at the Katanning plant, waiting for commissioning.

"Until the WA borders are open we are not able to get in the expertise from the east coast and New Zealand to finish the installation," Mr MacRury said.

Other technology in the pipeline includes solar energy installation which is still on the radar despite delays due to COVID-19.

Looking to the future, Mr MacRury provided plenty of optimism for producers.

"We believe prices will remain historically good for producers but there will be some pressure on prices when the NZ and Eastern Australian numbers flow," he said.

"There has been a lot of numbers go east in the past 8-12 months and they have also seen some very good lambing percentages over in the east with the good seasonal conditions, so we expect quite a volume of lamb to come when they do start to flow.

"There are going to be some good kills in front of us over there and I think it will be around the time when processing numbers in WA get tight into the new year.

"The increased numbers in the east will be good, as we will need these numbers to keep our customers supplied 52 weeks of the year with very good volumes.

"Despite these extra numbers in the east we believe livestock prices will remain strong but they will be unlikely to reach the levels of last season due to COVID-19 limitations on markets around the world, but producers will still get very good returns historically.

"In terms of skin and runner prices these continue to remain poor and there is no real light at the end of the tunnel.

"We have seen a small increase in our last tender for runners but nothing significant while the skin market is poor, it is inundated with skins, inventory levels are high so there is no great outlook there."

Looking forward Mr MacRury said the next 12 months would be one of consolidation for WAMMCO given COVID-19 was still widespread in its markets.

"I do believe we have to consolidate this year and return to profitability, which I am hell bent on achieving," he said.

"Then once we know where world markets are and what the situation is with COVID-19, then we can look to move to the next level and look at new opportunities.

"At this stage the next 12 months is about consolidation and doing the basics right and we won't go too far wrong."