Dairy farmers are spending - LIC

The farmer-owned co-op’s half-year earnings to November 30, 2017 rose 17% on last year’s to $153 million. Gross profit rose 37% to $57.5m.

 The half year results include most of the revenue from artificial breeding.

LIC chairman Murray King says the milk price is always a factor in farmer spending.

“This has partly driven an upturn in sales as farmers continue to invest in herd improvement services and solutions which deliver long term value and build a more sustainable farming business,” he says. 

“At the same time, we are also seeing the success of our transformation programme flowing through to the bottom line.” LIC set out to ‘transform’ its business after recording its first-ever loss in 2015-16.

King says cost efficiencies and business growth from the transformation were key contributors toward a better year-end result in 2016-17, and now this half-year result.

For example, the co-op is now better managing the travel its 840-odd AB technicians do each spring: during the last two AB seasons they cut their travel by about one million kilometres. This means less time on the road and more time on farm with customers and their herds, King says. 

“It saves time, fuel and on-road costs for the business, while also reducing driving time therefore improving safety.”

LIC also introduced a new herd testing cancellation policy, to help operate a more efficient service. 

“This contributed to a reduction in cancellations or changes at short notice by up to 50%.”

Business growth came from the Wagyu beef programme which offers farmers an alternative to bobby calves and an additional income source, and from the recently launched Space service which yields pasture management data from satellites.

LIC sold its Otago-based Deer Improvement subsidiary business to concentrate on its dairy business and its herd testing and diagnostics laboratory facilities in Riverlea, Hamilton, on which a leaseback arrangement allows LIC services to keep operating at the site.

 Standing still is not an option in the development of the business, King says. 

“LIC is vulnerable to the same disruption that other industries have experienced in recent years from new technology and innovation, environmental challenges, regulation and alternative milk products. We have to constantly improve and adapte the way we do business.  

“The transformation programme is one of two key initiatives underway to ensure LIC can meet future challenges and deliver on its strategic goals.”