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Dairy Brands Capitalises On Strong Demand

News Release 8 June 2001

Dairy Brands Capitalises On Strong Demand For Dairy Farms

Agribusiness company Dairy Brands NZ Limited has sold seven farms of its 14 farms during the current season, capitalising on strong demand for well-located dairy farms.

Late last year the company advised the New Zealand Stock Exchange that it was intending to sell its 14 dairy farm properties in Canterbury and North Otago.

This announcement followed the record end-of-season payout and a share price that, despite the turnaround in the company’s fortunes, continued to trade at a significant discount to the underlying value of its properties.

Three of the farms sold settled on 31 May with the other four properties sold settling at the end of the forthcoming season, in June 2002.

The sales programme is being undertaken to maximise value to shareholders and the company’s seven remaining farms are on the market with a view to complete the sales programme by June 2002.

“Dairy Brands will be managing 11 farms going into the new season,” says Peter Jensen, chairman of Dairy Brands.

“In the coming season, 9 of the 11 farms still under Dairy Brands management, will be company managed where Dairy Brands owns the land, stock and machinery and employs farm managers. The two other farms will have sharemilkers on them.

“The transition to ‘company farms’ has enabled Dairy Brands to capture the revenue from production, increasing our return on investment and profitability.”

…. / 2

Dairy Brands achieved record production for the season just completed, despite the drought. Production increased from 2.8 million kilograms of milk solids to 2.87 million kilograms of milk solids, which equates to a 2.5% increase over the previous year.

“While production was up on the previous season, the drought prevented the company from achieving its forecasted production. However, farm management ensured that our farms were less affected than many other South Island dairy units.”

“Dairy Brands is forecasting an increase in production in the new season with the outlook underpinned by strong performance from the industry and buoyant market returns.”

An overview of the Dairy Brands farm portfolio is set out in the following table:

Company Owned Hectares Number of Cows Production
2000/2001 season
1. Awanui 277 782 260,375
2. Seven Mile 177 560 220,000
3. Peebles Siding 196 585 231,205
4. Northbank 176 549 210,000
5. Southbank 229 829 315,000
6. Oakdale 141 425 150,000
7. Acton 172 530 202,000
Company Managed
8. Steward Road 181 520 209,821
9. Terrace Top 133 410 144,727
10. Rangitata 141 440 160,691
11. Ealing 205 560 189,753
TOTAL 2028 6190 2,293,572

i. The first seven properties are owned by Dairy Brands
ii. Properties 1 – 5 are ‘company farms’, that is Dairy Brands owns the land, stock and machinery and employs a farm manager and staff to run the farm.
iii. Properties 6 and 7 are currently operated by 50/50 sharemilkers, where Dairy Brands owns the farm and the sharemilkers provide stock, machinery and staff to run the farm.
iv. Properties 8 – 11 have been sold and will settle in June 2002. For 12 months beginning 1 June 2001, Dairy Brands will run them as ‘company farms’.


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