Hamilton Logan – Richmond Meats

William Richmond was born at Campbeltown, Argyllshire, Scotland, on 8 August 1869, the son of Thomas Orr Richmond, a farmer, and his wife, Catherine (Kate) Stewart. William left school at the age of 13 and emigrated four years later to New Zealand, working his passage on a sailing ship. He was a rabbiter at Benmore station in North Otago, and later worked his way to Hawke's Bay. William Nelson, the founder of Tomoana Freezing Works in Hastings, offered him a job in 1892 at Chesterhope, a training farm. He became assistant manager in the late 1890s. At Wellington on 9 July 1894 he married Janet Greenlees Mitchell; they were to have a son and two daughters, one of whom died in infancy.
About 1900 Nelson greatly expanded his meat operations and asked Richmond to purchase 300,000 sheep in one season. Nelson offered him £3,000 if he succeeded, and no pay at all if he failed; Richmond succeeded. He sailed to Britain about 1901 to investigate the British meat market, particularly Smithfield. He thought that Nelson was delivering too much prime meat and that the market for seconds was inadequately supplied. Nelson turned a deaf ear, so Richmond ught all the seconds and exported them on his own account, with more than handsome results. From then till 1909 he organised the stock acquisition for Tomoana.
William Richmond travelled on horseback all over Hawke's Bay to select stock. Much of the travel was overnight, to leave more time for stock work. Farmers on his route would often provide him with horses for the next move, to be returned on his way back. Later, he tried motorcycles, but soon turned to cars, having one of the first in Hawke's Bay - a Wolseley. He was reputed to have made the first crossing of the new Wairoa bridge, and to have been promptly charged with exceeding the speed limit of four miles per hour.
In May 1909 Nelson handed all stock and meat trading over to Richmond, and Tomoana became solely a killing and with others, including properties in north Taranaki, northern Hawke's Bay and Reporoa in the central North Island.flats between Napier and Hastings.
Richmond struck financial disaster in 1922; he had purchased hundreds of thousands of stock at an average of 21shillings per head, but after killing and shipping costs they realised less than seven shillings on the London market. He laughingly held lotteries among the office staff on the next day's figure. Richmond was insolvent, but help camegoodwill of farmer clients and business interests.
The company of W. Richmond Limited was formed in 1930 with Richmond as chairman and managing director. Before the Second World War, friction developed between Richmond and many directors over his generosity to farmers, price of stock as an advance. This was seen as contrary to shareholders' interests as Richmond had guaranteed at least the scheduled price as a return.
The problem was temporarily solved by government bulk purchasing during the war, but in 1946 the government stopped buying pelts and wool (meat followed in 1954), and Richmond reintroduced the system of owners' account. Some shareholders saw the advance as a loan, and in 1951 this led to an attempt to sell the business. The affair ended when a large shareholder and friend of Richmond bought out all the dissenters. Richmond, then 81, stood down as chairman but continued to be involved with the company until his death.
Janet Richmond had died in 1916. On 8 July 1918 at Hastings Richmond married Catherine Mary Wilson, who had worked for him as an accountant; they had two sons and a daughter. Catherine gained fame in November 1929 as the North Island's first woman pilot. She died in August 1941, and on 21 November 1942, Richmond married Constance Maurice White (née Mason) at Hastings. He died at Hastings on 23 August 1956; he was survived by his third wife, a daughter from his first marriage and two daughters and a son from his second marriage.
William Richmond neither smoked nor drank. He was, however, keen on betting, and owned racehorses, winning the 1918 New Zealand Grand National Steeplechase with St Elmn. His unerring judgement of stock, together with his drive and business acumen, made him one of the most significant figures in the Hawke's Bay meat industry.
Richmond Meats began trading in 1930, and the company and its founder suffered mixed fortunes in the early years of trading.
In the 1970's more of Richmond meats fell into foreign ownership, but Ceo and business structure itself remained the same. Until the 1980’s, the meat industry was dominated by overseas (largely British) owned companies, renowned for their rigidity, inefficiency, appalling industrial relations, and inept or non-existent marketing focussed on the U.K. It is now largely (though not entirely as will be seen) locally owned, and considerably more efficient, with diversified markets. This has been at the expense of jobs and working conditions: deunionisation, shift work and automation are now common, but that is to some extent balanced with proportionally less casualisation and more permanent staff. The industry has been restructured by the localisation of ownership rather than its overseas takeover.
Richmond pottered along profitably for that decade following one of the big industry rationalisations that were a feature of the 1980s. Richmond purchased Dawn Meat and Pacific Freezing and participated in the closure of Whakatu and the purchase of Takapau from Hawke’s Bay Farmers Meat Co, all during an eventful 1986.Faced with two pivotal decisions in the early 1990s, Richmond declined to get involved with the divestment of Waitaki to Affco and Alliance and a possible purchase of cash-strapped Weddel. Loughlin says Richmond was wise “because it would have been buying the wrong set of assets and be headed for disaster”. These decisions were before his time at Richmond, which began in 1993 as finance manager for the company, after earlier periods as an investment banker and chartered accountant.However, given the acquisitive nature of the times, those decisions could have condemned Richmond to a regional backwater of the rapidly coagulating meat industry or, worse still, a takeover target.Richmond’s big chance came in an offer to sell out of beef and lamb processing by Hawke’s Bay neighbour Graeme Lowe, of Lowe Walker, also strongly positioned in Northland and Taranaki, where Richmond did not operate.The $27-million purchase, completed in March 1998, quadrupled beef processing and focused Loughlin’s new Richmond team on making a success of the large takeover, after opportunities for due diligence had been limited.A subsequent rationalisation of beef facilities closed Lowe Walker Hastings, converted Te Kauwhata to deer and then closed Otaki early in 1999.“It took out 17 percent of our beef fixed costs while maintaining throughput at Dargaville, Te Aroha, Hawera and Hastings,” says Loughlin.“Our investment adviser said he had never seen such a complementary fit of facilities, which gave Richmond the benefits of great synergies.”A second round of lamb-processing facility rationalisation affected three plants in and around Napier/Hastings and one at Hawera while consolidating further processing in the $14-million new FoodTech plant on the Takapau site.“Again, this took out 15 percent of lamb-processing costs for a small slaughter capacity reduction coupled with a large further-processing improvement,” says Loughlin.Next up was the Waitotara Farmers Meat Company merger (in October 1999) which swapped money and shares for the lamb plants at Waitotara (northwest of Wanganui) and Tirau, southern Waikato. It added a million lambs a year throughput, which Loughlin says is disappointing considering the size of Waitotara before the merger, but the focus of this move was to strengthen its geographical position and “bank the synergies”.In a paper called “Pursuing a Food Company Vision through M&A” presented to the Institute of Directors seminar in Wellington on November 3, 2000, Loughlin commented that Waitotara brought $2 million in EBIT and $8 million in synergies.Candidly, Richmond was exhausted by the time of the Waitotara assimilation and missed some opportunities and disaffected Waitotara farmer-suppliers decamped to other meat companies.Likewise Richmond has not made all it could have from the purchase in July 1998 and subsequent development of the Gourmet Direct upmarket local supply business, now the flagship for Richmond in food service.“We have built a first-rate business more slowly than I would like,” he admits. Expansion-fatigue may also be indicated in his assessment of Richmond’s size presently as adequate for all that the company needs to do.Neither Loughlin nor, he believes, any members of the board set out deliberately to become the biggest meat company in New Zealand.“But there was a moment during long discussions about whether to acquire Lowe Walker, when one director said, ‘we had better consider where Richmond will be if we don’t buy Lowe Walker’.”The company has made three consecutive increases of more than $200 million a year in turnover, quickly taking it from number four in the industry by size to number one.Loughlin would far rather be known as the best meat company, not the biggest.“I aspire to be the best, both in terms of shareholder value and prices in the paddock. This is the double, if you like, and so far we are nowhere near where I want us to be.”A period of consolidation is dictated, taking out costs, raising efficiencies and developing new products.Richmond can never drop its risk management vigilance in such a low margin enterprise, he says.When earnings are as low as one to two percent of sales, a few wrong supply or sales contracting decisions can wipe out profit and a number of them can wipe out the company’s $120-million capital base. This has been a sadly recurring pattern in the meat industry. John Loughlin’s second year as Richmond CEO was the beginning of the distracting noises, as PPCS contended with Affco for control of one-third of Richmond being tendered by the Meat Board.When both were rebuffed, the shares went to the supposed Richmond-friendly investor grouping of HKM; three Maori business people.Not deterred, PPCS wooed HKM and in 1999 was again on the brink of control when Richmond’s farmer-shareholders successfully challenged the PPCS processes and repulsed the raider.A company called Active Equities, owned by Paul Collins and Bruce Hancox, rode to the rescue of Richmond, but that horse has also turned Trojan.Third time-lucky in 2000, PPCS purchased 16.7 percent of Richmond shares (10 percent from Auckland farmer-businessman Peter Spencer) and paid $3.65 a share for 49 percent of Hawke’s Bay Meat Holdings, a joint venture with Active Equities to own 35.8 percent of Richmond’s 41 million shares. Should it exercise the right to purchase the remaining 51 percent of HBMH between February and September 2003, PPCS will then own 52.5 percent of Richmond.
Perversely, yet another measure of the Richmond success to date has been the persistence of PPCS in gaining control, although the outcome for Richmond is as yet uncertain. PPCS presumably had an opportunity to block Loughlin’s nomination to the board of directors (before the annual general meeting in December) but chose to endorse his promotion in the expectation of further earnings growth. Capital structureWith two good years behind it and one good year in prospect, Richmond directors finally decided to seek a main board listing on the Stock Exchange last February, along with a $50-million capital notes issue.“Since the 1980s there had been a lot of debate as to whether listing was consistent with long-term farmer ownership,” says Loughlin.“I had always maintained it was, in that ‘value’ is a measure of future earnings, in other words sustainability, which cannot be gained at the expense of farmers.“Without farmers and without their stock coming through, any meat company only has a lot of assets in obscure places with redundancy obligations attached.“So we have to ensure returns are sufficient to sustain both the farming community and to reinvest in the business.“For a long time no-one was winning, with farmers and companies scrapping over the crumbs of the cake,” he says.The listing eliminated the secondary market discount (of 25 to 30 percent) by making the market for shares more liquid. Many among 1900 smaller (mostly farmer) shareholders have benefited, and PPCS fronted up with cash to Spencer, Collins and Hancox pushing the share price to $3 briefly before settling down around $2.60.The money raised from the sale of capital notes has retired bank debt and provided funds for further re-quipping, just completed at Oringi, Te Kauwhata and Pacific Beef (Hastings).While they are an expensive substitute for bank funding, capital notes strengthen the balance sheet and may help to secure the company against prolonged downturns.

Hamilton Logan – Richmond Meats

9 March Hamilton Logan – Richmond Meats
Hamilton Logan, past chairman of Richmond Meats will talk on the history of Richmond Meats, and founder W Richmond.
Richmond Meats began trading in 1930, and the company and its founder suffered mixed fortunes in the early years of trading.
Landmarks spokesperson Michael Fowler said “This company’s history is fascinating; from the charismatic owner to the takeover attempts by Brierley Investments, mergers and finally the intense struggle that led to the end of Richmond Meats as it was known in 2005”.
“Hamilton Logan will recount these stories with personal anecdotes, including meeting with past Prime Minister Robert Muldoon to de-licence the meat industry in the 1970s.”