CORRECT: LIC's FY net profit tumbles on one-offs but revenue reaches record
(Fixes year-earlier underlying earnings figure, clarifies one-off costs in 2nd paragraph)
By Rebecca Howard
July 19 (BusinessDesk) - Livestock Improvement Corp, the dairy herd genetics cooperative, reported a 55 percent drop in full-year net profit on higher restructuring costs but was upbeat about the current year as those costs will no longer be incurred.
Net profit for the year to May 31 was $9.3 million versus $20.8 million, the Hamilton-based company said in a statement. Reported earnings before interest and taxation were $14.9 million, also down 54 percent. In both cases, the result was weighed by one-off transformation costs and the annual revaluation of the biological bull team. However, stripping out $20.7 million of those one-time charges and an $8.6 million revaluation gain, ebit was $27 million versus $9.8 million in the same period a year earlier, when just $1.7 million of transformation costs were booked alongside a $24.7 million revaluation gain.
LIC embarked on a transformation programme after posting its first ever loss in the 2016 financial year as a slump in milk prices saw farmers scale back spending, and in turn, weighed on the value of the company's elite breeding herd.
While those costs ate into its net profit, LIC reported record total revenue of $236.4 million, up 16 percent on the year. "This is a positive result and reflects a strong performance in our core service areas of artificial breeding (AB) and herd testing, as well as continued benefits from our transformation programme," said board chair Murray King.
Looking ahead, LIC expects underlying earnings for the 2018-19 financial year to be in the range of $18-22 million, assuming no significant climate event or milk price drop takes place between now and then nor any major impacts from the Mycoplasma bovis cattle disease. Underlying earnings were $3 million in the year to May 31.
On Mycoplasma bovis, King said it was a "significant concern" for everyone in the dairy industry. The government is aiming to eradicate the disease - first detected a year ago - through culling and control. The disease, commonly found in cows globally, does not affect people or meat quality but can have serious effects on cattle, including mastitis, pneumonia, arthritis and late-term abortions.
“LIC is taking all measures possible to protect the national herd from this disease and working closely with MPI in this process. We have extensively tested our bulls and found no sign or indication of M. bovis. We are taking nothing for granted but we are confident that the measures we have in place will protect our bulls and customers from the disease," he said.