LIC post loss due to down­turn

South Waikato News - - What’s On - AN­DREA FOX

Listed farmer co-oper­a­tive Live­stock Im­prove­ment Cor­po­ra­tion (LIC) has posted a $4 mil­lion loss for the fi­nan­cial year, a re­flec­tion it says of the dairy in­dus­try price slump.

By con­trast the ar­ti­fi­cial breed­ing and in­for­ma­tion sys­tems spe­cial­ist com­pany made a profit of $13.7m the pre­vi­ous year.

Rev­enue for the year end­ing May 31 was 9 per cent down at $211m.

Chair­man Mur­ray King said lower milk prices had caused farm­ers to tighten their spend­ing on on-farm ser­vices. The dip in LIC’S profit also re­flected its con­tin­ued in­vest­ment in re­search and de­vel­op­ment and core tech­nol­ogy for the medium to long term. Dairy farm­ers are now in their third year of be­low breakeven milk pay­ments.

In­vest­ment dur­ing the fi­nan­cial year in­cluded the launch of the new Minda Live prod­uct in June, a mod­ern online ver­sion of LIC’S herd man­age­ment sys­tem used by 95 per cent of New Zealand dairy farm­ers.

Op­er­at­ing cash­flows at $14.4m com­pared to $34.8m the pre­vi­ous year re­flected lower sales and an in­crease in de­ferred pay­ment terms to farm­ers to help them with on-farm cash­flow.

Debt was $41m, up $31m on the pre­vi­ous year.

To­tal as­sets in­clud­ing bull teams were $323m, up $21m on the pre­vi­ous year. The debt:eq­uity ra­tio was 65 per cent. Bank loans were $41m at year end.

Net profit in­cluded the an­nual reval­u­a­tion re­quired un­der ac­count­ing stan­dards to the ‘‘fair value’’ of LIC’S elite bull team which re­sulted in a de­crease, net of tax, of $3.7m to a value of $87.5m, com­pared to a value of $92.6m in 2014-2015, the com­pany said.

This re­flected lower ex­pec­ta­tions around rev­enue be­cause of the dairy down­turn.

Fluc­tu­a­tions in fair value of the bull team are not con­sid­ered a key in­di­ca­tor of trad­ing per­for­mance. For this rea­son LIC also re­ports un­der­ly­ing net earn­ings net profit after tax ex­clud­ing the change in the fair value of bi­o­log­i­cal as­sets and re­lated tax ef­fect) which showed a loss of $300,000 this year, com­pared to $11m profit last year.

The com­pany said this was in line with its March fore­cast that it would break-even in the full year.

Rev­enue from or­di­nary ac­tiv­i­ties was $205m. In­clud­ing other in­come from grants to­tal rev­enue was $211m.

Fon­terra’s Chi­nese busi­ness part­ner Be­ing­mate has been fi­nan­cially dam­aged by a case of al­leged milk pow­der tam­per­ing, caus­ing it to fore­cast a loss of up to $48 mil­lion for the first quar­ter of the fi­nan­cial year.

Pre­vi­ously Be­ing­mate had pre­dicted a $21m profit, but in its lat­est fore­cast it said that due to ‘‘fake in­fant for­mu­las’’ it had re­vised this to a loss of be­tween $44.5m-$48m.

In March last year Fon­terra signed off on a deal to in­vest $700m for an 18.8 per cent stake in the com­pany.

As yet the only Fon­terra in­fant for­mula sold through Be­ing­mate is its An­mum in­fant for­mula, man­u­fac­tured in New Zealand.

But the dairy gi­ant is fi­nal­is­ing prod­uct tri­als and is in the fi­nal stages of reg­u­la­tory ap­provals with the Aus­tralian and Chi­nese gov­ern­ments to man­u­fac­ture for­mula at it­s­plant in Aus­tralia.

Fon­terra said it re­mained con­fi­dent about the part­ner­ship, which was ‘‘part of its long term busi­ness in China’’.

Fed­er­ated Farm­ers dairy chair­man An­drew Hog­gard said it was not good news.

‘‘Mir­a­cles don’t hap­pen overnight but we don’t want to see red ink.’’

‘‘Debt was $41m, up $31m on the pre­vi­ous year’’

Bulls graze at LIC’S New­stead farm.

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