LIC post loss due to downturn
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’’