Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


Landcorp forecasts bigger loss this year, no dividend

Landcorp forecasts bigger loss this year, no dividend

By Tina Morrison

Feb. 18 (BusinessDesk) - Landcorp Farming, the state-owned farmer, won't pay a dividend to the government for a second consecutive year as low milk prices erode earnings from its dairy business.

The company expects to post a net operating loss of between $8 million and $9 million in its current financial year ending June 30, chief financial officer Steve McJorrow told parliament's primary production select committee in Wellington. That's a bigger loss than the $1 million to $6 million it forecast in December, and compares with a net operating profit of $4.9 million last year. The projected loss means Landcorp won't pay a dividend for the year, McJorrow told BusinessDesk after the select committee meeting.

Global milk prices have slumped and remained low for longer than expected as supply outweighs demand, with prices now below what most dairy farmers need to break even. To help counter the downturn, Landcorp is reducing the size of its dairy herd and milk volumes, mulling other uses for the Wairakei Estate land it leases north of Taupo and which it has been converting to dairy from forestry, using technology to cut costs, and exiting its sharemilking contract with Chinese partner Shanghai Pengxin to focus on developing higher value products.

Fonterra Cooperative Group, New Zealand's dominant milk processor, is forecasting a farmgate milk payout of $4.15 per kilogram of milk solids for the current season, although five of six dairy analysts surveyed by BusinessDesk expect the payout will be lower. DairyNZ, which collects industry data to work out the milk payment required for farmers to pay their bills each season, says the average farmer currently requires $5.30/kgMS to break even.

Landcorp's McJorrow told the select committee there is uncertainty around the outlook for milk prices next season, noting one bank economist forecast $4.60/kgMS while another predicted $6/kgMS.

"We haven't actually kicked off our budget yet but we are thinking about it," he said. "When we do come to do our budget though, we will be taking an extremely conservative view on it."

Responding to a question from the committee, McJorrow agreed he would be more likely to go with $4.60/kgMS for next year, noting it was "not dissimilar" to where Landcorp expects to be this year.

Chief executive Steven Carden noted it was "one of the most difficult payout levels we have experienced as an industry for a long time."

Landcorp would continue to seek domestic and international partnerships to access capital and networks to aid development of its business, Carden said.


© Scoop Media

Business Headlines | Sci-Tech Headlines


Commerce Commission: Latest Broadband Report Confirms Improved Performance Of Premium Fibre Plans

The latest report from the Commerce Commission’s Measuring Broadband New Zealand programme shows that the performance of Fibre Max plans has improved substantially. This follows a collaboration between the Commission, its independent testing partner, ... More>>

Air New Zealand: Capital Raise Deferred

Air New Zealand has decided to defer its planned capital raise to later in 2021 allowing more time to assess the impacts of recent developments on the airline’s path to recovery. 'We’ve seen some clearing of COVID-19 clouds recently, with ... More>>

Commerce Commission: Cartel Conduct Now Punishable By Up To 7 Years’ Jail Time

Cartel conduct can now be punished with a term of imprisonment of up to 7 years, after the Commerce (Criminalisation of Cartels) Amendment Act 2019 came into effect today. Cartel conduct includes price fixing, market allocation and bid rigging (see ... More>>

Stats NZ: Auckland Population May Hit 2 Million In Early 2030s

Auckland’s population may rise from about 1.7 million currently to 2 million by early next decade, Stats NZ said today. “Auckland will likely have the highest average annual growth of New Zealand’s 16 regions over the next 30 years, from ... More>>

Stats NZ: New Report Shows Impact Of Demands On Land In New Zealand

A new environmental report released today by the Ministry for the Environment and Stats NZ, presents new data on New Zealand’s land cover, soil quality, and land fragmentation. The land cover data in the report, Our land 2021 , provides the most ... More>>


Stats NZ: March Card Spending Rebounds Despite COVID

There was a lift in retail card spending in March following a fall in the lockdown-disrupted February month, Stats NZ said today. Seasonally adjusted retail card spending rose by $53 million (0.9 percent), compared with February 2021. Visit our website to read ... More>>

PwC: Outcome Of Review Into Air New Zealand Gas Turbines Business

Air New Zealand has received the report into its Gas Turbines business from independent external advisers PwC. Air New Zealand Chairman Dame Therese Walsh says the report identified a range of effective controls in the Gas Turbines revenue contracting ... More>>