Increase in AB boosts LIC’s result

The co-op has recorded a 5% lift in revenue to $161 million for the half year ending November 30, 2018.

AB sales were up on the previous year as more farmers extended their farm’s AB period and opted for short gestation genetics over natural mating bulls, says chairman Murray King.

NZ-wide 36% more farms adopted all-AB mating than the previous year, the biggest spike the co-op has seen in the emerging no-bull trend, he says.

“This is partly due to the heightened biosecurity focus from M. bovis but with the demand we’ve seen for other solutions it’s evident farmers are looking for opportunities to maximise their profitability and productivity.”

Sales of LIC’s products were strong in NZ, including its DNA testing service; more farmers used the service to confirm parentage of their young stock and identify the best herd replacements for productivity. 

LIC’s earnings before tax for the six months reached $59.3m and net profit jumped 117% -- from $15m last year to $32.8m.

King said the half-year result reflected recurring benefits from the cooperative’s business transformation, which improved business performance and profitability.

The co-op maintained R&D spending to commercialise high-value genetics and technology products for its farmers.

The half-year results include most AB and herd testing revenues but not a similar proportion of total costs, so are not indicative of the second half, nor the full year, result. No dividend is declared at half year.

King expects the co-op’s transformation to continue improving earnings.

“LIC’s refreshed business strategy to deliver innovation-led growth by focusing on optimising and enhancing our core business will build on our transformation to keep LIC and our customers as leaders of the global pastoral dairy system.  

“The strategy is also critical to a modern, progressive cooperative that can meet the needs of its customers and the challenges in the broader industry by continually adapting and improving. 

“Total cow numbers in the national dairy herd are steady, but our focus on driving value for farmers from our core products through innovation is delivering more value as farmers invest in new genetic products to fasttrack genetic gain within their herds and meet changing market demands,” King says.

$800k

LIC spent at least $800,000 on new measures to protect customers from M. bovis.

They included a world-leading daily testing regime of its bulls through the peak mating period. 

Chairman Murray King says the co-op absorbed these costs to avoid more price increases. 

Innovations

LIC’s ‘A2 BULL team’ was introduced to meet growing demand for A2 milk last year.

Chairman Murray King says the bulls were in high demand, accounting for 10% of total AB sales in its debut season as more farmers look to breed an A2 herd. 

“LIC also saw strong uptake of its premium genetics product -- the Forward Pack bull team -- which provides access to elite new genetics earlier to increase the rate of genetic gain onfarm,” he says.

During the year LIC continued implementing and improving its SPACE service, which measures pasture via satellite imagery and algorithms. The system is now used by at least 1200 farmers in Southland, South Otago, Canterbury, Manawatu, Waikato and Bay of Plenty.