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A Challenging Year For Landcorp Farming Limited

4 November 2004

A Challenging Year For Landcorp Farming Limited

Landcorp’s annual report records a year of steady performance but with results hit by climatic extremes and a high exchange rate contributing to variable and generally lower farm product prices.

Board Chairman Alison Paterson said the year had produced a number of significant highlights including the highest level of asset growth in the history of the company but with a lower than budget earnings before interest and tax. Climatic conditions including the severe flooding in the lower North Island during February impacted significantly on Landcorp’s operations with 1,200 hectares of the Moutoa properties near Foxton inundated when the Manawatu River spillway stop banks were breached.

Earnings before interest and tax for the Landcorp Group was $15.5 million and shareholders’ funds increased by $72.3 million. Overall a 16.9% return on funds invested was achieved. Provision has been made for a final dividend of $2.0 million payable on 29 October 2004. This follows an interim dividend of $23.7 million paid in March this year.

Mrs Paterson said the company had now completed around three quarters of its five year programme of capital development aimed at maintaining sheep and beef revenues but providing by further development of existing properties, equivalent revenue from deer and dairying. Three new dairy farms which will milk 3,050 cows and a 17% increase in dairy production was achieved during the year. A further 4,354 hectares were converted to deer farming and deer numbers increased by 15% to over 126,000.

Landcorp has continued with its environmental and social initiatives and Mrs Paterson said the company was gratified to receive two environmental awards for covenanting areas of environmental significance on properties it owned in Southland. The company has continued to support the industry with training, sponsorships and other activities. Included in these is the Future Farmer Programme carried out in association with Agriculture New Zealand. Each year 16 students commence a career in farming and following twelve months intensive training take up full time positions on Landcorp properties nationwide and are mentored by experienced farm staff.

Subsidiary company Landcorp Investments Ltd was wound up during the year following the sale of its remaining assets. This successfully completed the realisation of approximately 20,000 property based assets subject to the Land Act 1948 and incorporated in the assets purchased from the Crown when Landcorp was established as an SOE in 1987. Mrs Paterson said that tax paid profits returned by the company in dividends to shareholding Ministers since that time have totalled $259 million.

Mrs Paterson believes the international outlook for NZ agriculture is steady and robust with strong growth rates being recorded by most of our trading partners. She says there is an encouraging demand outlook for agricultural products and depending on the extent of any movements in interest and exchange rates, she expects farm incomes to improve.

She confirms Landcorp will continue to invest in research and development, breeding genetically superior animals and adopting new high performance forages.

ENDS

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