Boost for NZ, Nordic Jerseys genetic link
A new collaboration is underway to improve the genetic links between the New Zealand and Nordic Jersey cattle populations.
A 139% increase in Livestock Improvement Corporation’s profit to $22.2 million reflects a turnaround in performance and profitability, says chairman Murray King.
After-tax profit for the year ending May 31, 2019 was up from $9.3m last year. It follows the co-op reporting a loss in 2016.
This is further evidence of LIC’s great financial shape, says King.
“It means we are not only able to deliver a solid dividend to shareholders, but the business can also continue its significant investment in R&D and digital transformation, and consider new options and opportunities to deliver innovation-led growth.”
Underlying earnings were $19.5m, up 541% from $3m last year. Total revenue was $246.5m, up 4% from $236.4m last year.
Setting records in the strength of its balance sheet, operating cashflow and total revenue, the co-op will return $15.6m in dividend to shareholders. This fully imputed dividend equates to 10.98c per share and represents a yield of 12.2% based on the current share price of 90c. This dividend is up from 1.71c last year and is the largest dividend the co-op has paid since 2013.
King describes the turnaround as a success story after reporting a loss in 2016.
“Our focus has been on delivering what we said we would do to improve the company’s performance. This is important at a time when dairy farmers need certainty and trusted partners to help them navigate the rapidly changing domestic and global industry.
“LIC is the DNA of New Zealand’s dairy industry, providing farmers with superior genetics and agritech solutions to continually improve the productivity and profitability of their farms.
“We have to ensure that in the data-driven future of global dairy, LIC and our farmers are in a position to be the disruptors, not the disrupted. That takes financial strength, high performance and a clear focus on the innovations needed to keep our farmers ahead of the game.
“The major strategic projects we have completed since 2016 to shape LIC into a modern, progressive co-op have enabled this year’s strong results. Importantly, we believe these results are sustainable and we are confident we will continue to build on them in the coming years.”
While 2017-18 was a year of transformation for the co-op, including capital restructuring and a strategy refresh, 2018-19 was spent embedding its new innovation-led growth strategy with an ongoing focus on the core NZ dairy industry.
LIC’s investment in R&D in 2018-19 was $13.6m, which equates to 5.5% of revenue and is well above the primary sector average of about 1%.
The co-op also got extra funding from MBIE and MPI to boost two key R&D projects aimed at driving improvements in the health and wellbeing of the national herd and more sustainable milk production.
At least $800,000 was spent on new measures to protect customers from Mycoplasma bovis, including a world-leading daily testing regime for its bulls and important changes to its herd testing operations. The co-op absorbed these costs to avoid more price increases in 2018-19.
LIC also bought 64ha of farm land in Waikato to increase its biosecurity quarantine facilities.
The co-op expects underlying earnings to increase to $21-25m in 2019-20, assuming no significant climate event or milk price drop between now and then, nor any major impacts from biosecurity threats such as M. bovis.
Strong in core products
Sales from core products including artificial breeding (AB) and herd testing were strong, with 5.68 million AB straws sold and 10.96 million milk samples processed, LIC reports.
Demand for animal health testing was also high, particularly for Johne’s disease testing.
International business sales of genetics and automation technology continued to grow, particularly in the UK and Ireland.
Genetics sales in NZ showed farmers seeking to raise herd values by extending their AB period. And there was increased uptake of A2A2 genetics and genomic bull teams which provides earlier access to elite new genetics.
LIC’s ‘A2 bull team’, introduced in 2018 to meet growing demand for A2 milk, accounted for 10% of AB sales in its debut season, as more farmers look to breed towards an A2A2 herd.
During the year LIC continued to improve its Space service and make it available to more farmers NZ-wide. The satellite pasture management service, which offers farmers a free trial period, now has at least 1000 customers registered for the annual subscription.
Previous strategic business acquisitions also made good gains in 2018-19: the farm financial management software provider Figured (2014), the Australian heat detection aid manufacturer Beacon (2015), and the UK business NMR (2017).
Fonterra shareholders are concerned with a further decline in the co-op’s share of milk collected in New Zealand.
A governance group has been formed, following extensive sector consultation, to implement the recommendations from the Industry Working Group's (IWG) final report and is said to be forming a 'road map' for improving New Zealand's animal genetic gain system.
Free workshops focused on managing risk in sharefarming got underway last week.
Annual farmer gathering, the South Island Dairy Event (SIDE), is set to make history as it heads to Timaru for the first time.
Installing 400 solar panels at their Taranaki piggery and cropping operation will have significant environmental, financial and animal welfare benefits for the Stanley family.
WoolWorks, New Zealand’s largest wool-scouring company, has partnered with the Lions Club of Riverton to help raise money for much-needed repairs to the Southland town’s swimming pool.
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