Landcorp: No dividend, no worry
The Government says it is ‘‘comfortable’’ with Landcorp’s intention to pay off debt and invest in its value-add programme rather than return a dividend.
Agriculture Minister Damien O’Connor’s statement goes against advice Treasury has given to the Government in recent years. In 2016 it recommended Landcorp’s statement of corporate intent for the 2016-17 year be rejected, so the board could reconsider its dividend policy.
Landcorp has not paid the Government a dividend for several years, preferring to use profits to pay off debt and to invest into new ventures such as sheep milk, venison for high end United States restaurants and wool for Danish indoor shoes.
Timaru-based Light Leathers uses deer hides from Landcorp’s Mararoa farm to supply French fashion brand Daniel Hechter for its high priced leather satchels.
The New Zealand Merino Company has signed a contract to buy the next three year’s production of Landcorp’s coarse wool, to be used to manufacture Danish indoor shoes called glerups.
Deer milk is the latest innovation the state-owned enterprise is trialling.
It said it intended to lift net capital expenditure to $48.8 million this financial year, up from $32.4m last year.
Since energetic chief executive Steven Carden took over in 2013 and began to up Landcorp’s game in terms of marketing strategy, and environmental and farm safety performance, Treasury has recommended it should focus on its core farming operations.
‘‘There is a long history of SOEs failing when attempting to diversify, resulting in the loss of value to the taxpayer,’’ Treasury officials noted in a letter drafted for the government to send to Landcorp.
They would have had in mind state-owned Solid Energy which foundered when it tried to diversify away from coal. Landcorp’s finances are a lot healthier, with debt of $219.6m on assets of $1.81 billion.
Pre-election, Landcorp was facing the prospect of being sold off if National was returned to power.
Former Primary Industries Minister Nathan Guy announced an 11th hour policy of breaking up Landcorp’s farms into 100 parcels to make way for young farmers in a lease-to-buy deal.
‘‘There is no clear public good coming from Crown ownership and little financial return to taxpayers,’’ Guy said.
National’s antipathy towards Landcorp pre-dated the last two weeks of election campaigning.
Last year leader Bill English described New Zealand’s biggest farmer as a ‘‘poor investment’’, although adding the Government had no plans to sell it off.
Former SOE Minister Todd McClay was always reluctant to comment on the financial performance of Landcorp, in good years and bad.
Carden, whose salary rose from $540,000 in 2015-16 to $640,000 this year (a base salary, plus an incentive bonus), downplayed any notion of a sea change in Landcorp’s fortunes. The SOE was continuing with its project to add value to the products from its farms, and improve environmental and health and safety performance.
That strategy appears to have included a new branding exercise and has gone beyond products to the SOE itself.
On its publicity material it describes itself as ‘‘Pa¯mu Farms of New Zealand (Landcorp)’’. Pa¯mu means farm in Ma¯ori.
Critics have carped that so far there appears to be little value coming from the new strategy; in 2016-17 old-fashioned milk pro- vided $26.3m of its $51.9m profit, along with three properties sold for $16m.
In its annual report Carden said its positive results were also due, in large part, to control of operating expenses.
One of Landcorp’s chief reasons for being is to serve as a land bank for Treaty of Waitangi settlements.
Over the past 10 years about 25,000 hectares of land has been transferred back to the Crown for treaty settlement. Landcorp continues to farm the properties in joint ventures with iwi, or sometimes they are handed back to iwi who take over their running.
Landcorp manages 125 farms on behalf of the taxpayer, and its 661 permanent employees run 579,871 sheep, 62,526 dairy cows, 82,078 beef cattle, and 105,054 deer.
Of the land it has responsibility for, 158,394ha is Crown-owned and it leases 219,692ha.