Farmers ‘doing more with less’

“They are using cost-effective, innovative solutions to get more value on-farm and ultimately do more with less,” he says. 

This was also evident in the 2018-19 Dairy Statistics with farmers achieving record milk production while cow numbers continue to decline.

 “This is good for our dairy industry’s profitability, competitiveness and reputation in global markets. It shows our farmers are evolving with the times, and demonstrating careful stewardship of their land, their cows and the resources they need to produce milk.”

King made the comments at LIC’s half-year financial results announcement for the six months to November 30, 2019.

The net after-tax profit of $30.3m was down 7.6% from the same period last year. Highlights included $163m total revenue, up 1.4% from that period last year.

The earnings before interest, tax, depreciation and amortisation (EBITDA) of $58.4m were down 1.5%. The earnings before interest and tax (EBIT) were $43.1m, down 6.5%. Underlying earnings (NPAT excl bull valuation change) remains forecast to be $21-25m for year-end, up from $19.5m in 2018-19.

NPAT, EBIT and EBITDA were down due to timing of expenses incurred within the period. The co-op’s guidance for underlying earnings at year-end is still expected to be above the prior year.

King says the result was in line with market guidance reported in July and is underpinned by the co-op achieving the milestones on its strategic roadmap, which have shaped LIC into a modern, progressive and high performing co-op.

“This is another solid result which builds on all the work we have done in recent years to transform the business and drive an innovation-led growth strategy to keep LIC and our farmers leading the global pastoral dairy system.

“LIC’s strategy is built off a global understanding of the factors driving change in global dairy markets and here in New Zealand. This is important at a time when dairy farmers need certainty and trusted partners to help them navigate the change.  It requires financial strength, high-performance and a clear focus on the innovations needed on-farm to keep our customers’ farms competitive, profitable, sustainable and efficient.

“Data is the fuel to drive this strategy forward and we will continue to drive our access to and use of data. It provides the insights for LIC’s herd improvement and technology innovations and to enable real-time decision making on-farm. It also improves our ability to make the right decisions about where to invest and where to focus our critical R&D spend,” King says.

King says the result was driven by a continued shift towards ‘precision farming’ with farmers investing more in genetics and technology solutions that support them to produce more with less and drive further improvements in efficiency and sustainability.

Sales in New Zealand during the half-year period reflected increased demand for LIC’s premium AB products to deliver increased value on-farm, including genomic bulls, sexed semen, and genetics offerings in A2, short gestation and Wagyu.

 Demand for animal health and diagnostics testing also increased, with more farmers proactively monitoring the health and wellbeing of their herd against diseases such as BVD and Johne’s, to enable early diagnosis, treatment and to minimise production loss.

 More farmers are also adopting LIC’s technology solutions including satellite pasture management service SPACE, which continues to grow in popularity, and more farmers are making the switch to LIC’s web-based MINDA LIVE system and MINDA app for animal recording and insights.

International markets continued to perform strongly, King says, particularly Australia, South America and South Africa. However, the automation subsidiary business was challenged by a shortage of capital in the market with revenue down 23% from the same period as last year.

King says LIC has one of the highest rates of investment in research and development in the primary sector (5.6% of revenue in 2018-19) and investment decisions are critical to lead the global pastoral dairy system into the future.