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Landcorp posts 133% gain in full-year operating profit

Landcorp posts 133% gain in full-year operating profit as dairy sales surge

By Jonathan Underhill

Aug. 26 (BusinessDesk) - Landcorp posted a 133 percent increase in full-year operating profit as New Zealand's biggest corporate farmer benefited from a surge in dairy prices that won't be sustained in the current year, allowing it to lift its dividend payment by 40 percent.

Operating profit was $30 million in the 12 months ended June 30, from $13 million a year earlier, the Auckland-based company said in a statement. Sales climbed 37 percent to $241.7 million, including a 70 percent gain in milk revenue to $129 million. Net profit soared 402 percent to $54.7 million, reflecting changes in the value of financial instruments and livestock.

Last week, state-owned Landcorp said operating profit would fall to a range of $8 million to $12 million in 2015, missing the $20.5 million forecast in its statement of corporate intent, reflecting the slide in global dairy prices this year from their February peak, which prompted Fonterra Cooperative Group to slash its forecast farmgate milk price to $6 per kilogram of milk solids from $7/kgMS.

"Despite the bottom-line impact of the projected fall in milk prices for 2014/15, Landcorp was well placed to continue to record sustainable profit growth over the medium term," chief executive Steven Carden said in a statement. "We're very focused on initiatives to raise productivity and efficiency across our operations."

Costs rose 15 percent to $207 million in the year, reflecting the start of its share-milking agreement with Shanghai Pengxin Group, which acquired the Crafar farm, and the expansion of its dairy conversion programme in the Waikato.

Landcorp will pay the government a $7 million dividend, up from $5 million a year earlier. Its total shareholder return was $115.9 million in the latest year, from a loss on that basis of $1.5 million in the previous year. The turnaround mainly reflected a $36.7 million gain on the value of livestock and a $67.6 million revaluation gain on land and improvements, it said.

Carden said that in the medium and long term, Landcorp "will be taking significant steps to reduce our exposure to commodity price cycles." It aims to do that by widening the range of livestock farmed and increasing its focus on red meat production of lamb, beef and venison.

"We also plan to ensure our products are targeted at niche markets where we can have a direct relationship with the customer," he said.


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