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Dairy Industry Report Shows Low Performance

7 December 1999 PR136/99

DAIRY INDUSTRY MONITORING REPORT SHOWS LOW PERFORMANCE

"Dairy company annual reports are of high quality, but the underlying results desperately need improving, " said Charlie Pedersen, Chairman of Dairy Farmers of New Zealand.

Dairy Farmers of New Zealand today released the 1999 Dairy Industry Monitoring Report. This is the sixth year DFNZ have released the comparative analysis of dairy company financial reports.

"While the standard of reporting is high," Mr Pedersen said, "the actual performance is not so bright." An analysis of returns on capital employed clearly shows the industry's very low returns of the last four years.

"Once the distortion of Dairy Board shares are removed, the report shows that only Tatua Co-op Dairy Co at 10.8% and Tasman Milk Products Ltd at 9.9% achieved returns on capital that were anywhere near passable." said Mr Pedersen.

"This is a positive sign that smaller companies can carve out an independent niche for themselves if they stay outside the Mega Co-op. The standout performer - Tatua Co-op Dairy Co Ltd - demonstrates that there is a clear role for a innovative, specialised manufacturer and marketer which invests heavily in R&D."

"Given the comparatively dismal performance of the larger companies, they may well look to the same formula for themselves, as current returns are just not acceptable." commented Mr Pedersen.

The report makes the point that this is the first year that dairy farmers are able to see the impact of the industry's new payment system; the Business Development Project (BDP). Mr Pedersen said that the companies thought to be hit the hardest - small cheese companies with high-grade income - seem to have done much better than the average.

The report was prepared on behalf of Dairy Farmers of New Zealand by Peter Reed, a former dairy company secretary and financial controller with over 30 years of experience in the dairy industry.

The full report is on the Federated Farmers website: www.fedfarm.org.nz

ENDS For further information: Charlie Pedersen 025-463-480 OR 06-329-9896 Kevin Petersen 04-473-7269


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