NZ Farming Systems annual loss widens on feed costs, farm operations
Aug. 29 (BusinessDesk) – NZ Farming Systems Uruguay Ltd., the South American dairy farmer controlled by Singapore’s Olam International Ltd., said its annual loss widened after it spent more on feed and running its farms. It will return to profit in 2012, the company said.
The net loss was US$8.7 million, or 4 cents a share in the 12 months ended June 30, from a loss of US$7.9 million, or 3 cents, a year earlier, the company said in a statement today. Revenues jumped 91% to US$43 million, mainly reflecting an increase in milk sales.
Farming Systems is 86% owned by Olam after the Singaporean food commodities group’s full takeover bid came up short of the 90% target that would have allowed it to take the business private. Olam has extended credit to Farming Systems by way of a US$70 million loan, helping the company complete its farm developments and expand its herd.
The jump in expenses was led by a decision to increase use of concentrate feeding for its milking cows, which saw cropping and feeding costs more than triple to US$21.1 million. Drought in parts of Uruguay and generally higher feed costs also contributed.
The company said it expects a similar pattern of higher milk sales and rising expenses in the current year but revenue will outpace the costs, resulting in positive earnings before interest and tax and net profit. Further improvements are expected in 2013 and beyond, it said.
The shares haven’t yet traded today and were last at 66 cents, valuing the company at $161 million.
Farming Systems’ aim when it was set up under the auspices of PGG Wrightson was to buy inexpensive land in Uruguay suitable for dairy conversion and export New Zealand’s intensive farming techniques to South America.
The global financial crisis starved it of debt funding to complete the developments and Olam snapped up much of the stock by paying a premium of almost 30% for much of the stock.