Wednesday, 18 February 2015 14:37

Profit ‘review’ by state farmer

Written by 
Landcorp CEO Steven Carden. Landcorp CEO Steven Carden.

State farmer Landcorp is reviewing its full-year profit forecast in the face of a lower milk payout and dry weather.

 The company turned over $109.8m and made a net profit of $1m for the six months to December 31 last year; it forecasts a full year profit of $1m-$6m.

But chief executive Steven Carden says the first six months had been challenging and the full-year profit is now under review.

 “A result like this will come as no surprise given the milk price and drought challenges. However, we have cushioned the impact of these external factors by anticipating them early. One example is our support of the Fonterra guaranteed milk price scheme and another is our proactive livestock management around the country ahead of the drought.”

Fonterra’s offer in June last year to buy 40 million kgMS at a guaranteed price was well under-subscribed; this saw Fonterra’s then-season forecast price of $7/kgMS applied, a happy outcome for farmers who pitched to supply a total of 25 million kgMS, and who then saw the forecast nosedive to $4.70kgMS.

But not all Landcorp milk is supplied to Fonterra.

The fall in milk prices has significantly impacted revenue, says Carden. However, the company remains on track for a modest profit.

“These first six months have seen us open new dairy units in Taupo and we have achieved our second-highest lambing percentage in our North Island livestock business.

“We’re continuing our efforts to increase yields, reduce costs across our operations and create capacity to invest in our people and environment programmes. We’ve eliminated a layer of farm management in Wellington, increased decisionmaking at the farm level and the new FarmIQ Farm Management software system is creating some incredible gains throughout our livestock business.

“Flourishing in a highly volatile world means maintaining a diverse portfolio of other species farmed. We plan to refocus our traditional beef, lamb and venison products around particular customers and we’re trialling new higher-value sales opportunities in sheep milk, deer leather and manuka honey.

“Across all our products we’re after customers in niche markets with specific requirements.

“We’ve also taken significant steps to improve the marketing of our products. For example, our partnership with New Zealand Merino to market our entire coarse wool clip gives us a direct relationship with some well-known consumer brands,” Carden says.

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