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Wayne McNee, LIC chief executive.
The farmer-owned co-op LIC says the $20 million cost to transform the business has been money well spent.
LIC chief executive Wayne McNee says the revamp is contributing to the co-op’s success: it posted record total revenue of $236m in 2017-18 -- up 16% on the previous year.
McNee, a former director-general of the Ministry of Primary Industries, says new processes put in as part of the transformation are working well.
The LIC annual meeting in Hamilton this month heard that the transformation delivered a one-off benefit of $30m and recurring benefits of $60m annually.
In his report to shareholders, LIC shareholders council chairman Mark Meyer questioned the $20m bill. He asked if the same results could have been achieved at lower cost.
LIC chairman Murray King told the meeting he didn’t believe “we could have achieved it for less”.
“If you give me an opportunity to invest $20m and turn it into $60m, surely that would be a good investment I would have thought.
“The $60m benefits are recurring; the $20.7m is a one-off cost and it won’t recur.”
Over the last year, LIC separated into two businesses -- a herd improvement company (LIC) and an agritechnology subsidiary (LIC Agritechnology Company). LIC’s core products Minda, AB and herd testing remain with the co-op. Minda is owned by the co-op but operated by the subsidiary.
It has also sold its Deer Improvement subsidiary in Otago and its herd testing and diagnostics laboratory facilities in Riverlea, Hamilton which included a leaseback arrangement to allow continued operation of LIC services at the site.
In July, LIC simplified its share structure, bringing together its existing two classes of shares into a single class of shares.
McNee says the changes accelerate LIC developing products and getting them faster to markets.
“It’s also helping us keep costs down, reflected in part in our underlying earnings.
“We definitely think it has been money well spent; we couldn’t have done as well by spending less.”
LIC embarked on the transformation after recording its first-ever loss in 2015-16 and starting to make cuts into its R&D spend.
“We didn’t want to do that so we decided to make big changes in the business.”
LIC has an ambitious R&D spending programme that will drive its sustainable growth and profitability into the future and deliver more value to its farmer shareholders.
King says LIC’s spending on R&D and innovation ($13.2 million last year) is over 5% of its revenue – well above the NZ primary sector average of 1%.
LIC chief executive David Chin says meeting the revised methane reduction targets will rely on practical science, smart technology, and genuine collaboration across the sector.
Opening a new $3 million methane research barn in Waikato this month, Agriculture Minister Todd McClay called on the dairy sector to “go as fast as you can and prove the concepts”.
The Government has announced it has invested $8 million in lower methane dairy genetics research.
The first calves of a new crossbred dairy-beef offering are now on the ground at a Pamu (Landcorp) farm near Taupo.
A US-based company developing a vaccine to reduce methane emissions in cattle has received another capital injection from New Zealand’s agriculture sector.
Acclaimed fruit grower Dean Astill never imagined he would have achieved so much in the years since being named the first Young Horticulturist of the Year, 20 years ago.
The Ashburton-based Carrfields Group continues to show commitment to future growth and in the agricultural sector with its latest investment, the recently acquired 'Spring Farm' adjacent to State Highway 1, Winslow, just south of Ashburton.
New Zealand First leader and Foreign Affairs Minister Winston Peters has blasted Fonterra farmers shareholders for approving the sale of iconic brands to a French company.
A major feature of the Ashburton A&P Show, to be held on October 31 and November 1, will be the annual trans-Tasman Sheep Dog Trial test match, with the best heading dogs from both sides of the Tasman going head-to-head in two teams of four.
Fewer bobby calves are heading to the works this season, as more dairy farmers recognise the value of rearing calves for beef.
The key to a dairy system that generates high profit with a low emissions intensity is using low footprint feed, says Fonterra program manager on-farm excellence, Louise Cook.
