Thursday, 21 July 2016 16:01

LIC makes $4m loss

Written by 

Farmer-owned cooperative, Livestock Improvement Corporation, made a loss of $4 million in the year to May 31 2016, down from a profit of $13.7 million the previous year.

LIC revenue from ordinary activities was $205 million and including other income from grants, totals $211 million, 9% down on the total $232 million achieved during 2014-2015.

Lower milk prices have impacted on-farm buying decisions, as many farmers look to reduce costs and indeed go into survival mode through the difficult financial times facing dairy farmers, LIC says in a statement.

This decrease reflects the prolonged New Zealand dairy industry downturn, and the continued investment by LIC on R&D and core technology for the medium to long term future of our industry, it says.

"During the last year LIC has made substantial reductions in costs through reducing expenses such as travel and training, focusing capital IT investments on key areas only, extending working life of assets and recruiting only essential personnel," the statement says.

"The benefits of LIC's investment in R&D and core technology flow to LIC's 10,500 New Zealand dairy farmer shareholders in the form of continually improved services and products to improve efficiency and productivity on-farm.

"Investment in 2015-2016 included a significant investment in the new MINDA LIVE product launched at National Fieldays in June 2016. MINDA LIVE is a modern online version of LIC's herd management system that is used by 95% of New Zealand dairy farmers.

"The results also reflect the significant spend on core technology in prior years that is now flowing through as increased depreciation annual charges. NPAT includes the annual revaluation required under accounting standards to "fair value" of the biological elite bull team which, this year, resulted in a decrease net of tax of $3.7 million to a value of $87.5 million in 2015-16 compared to a value of $92.6 million in 2014-15. This reflects lower expectations around future revenue consistent with the industry outlook. The bull team is valued using a model designed independently of LIC, that looks at future revenue streams and costs associated with the current bulls owned, discounted back to current value.

"The fluctuations in fair value of the elite bull team are excluded for the purposes of determining the appropriate dividend amount and are not considered to be a key indicator of trading performance. For this reason, LIC also reports Underlying Net Earnings (NPAT excluding the increase or decrease on fair value of elite biological assets and the related tax effect) which was a small loss of $300,000 this year ($11 million profit 2014-2015). This is in line with the forecasts made at half year of a break-even position."

Strength of balance sheet: LIC continues to operate a strong balance sheet with total assets including cash, software, land and buildings and bull teams of $323 million, an increase of $21 million over the previous year with an equity ratio of 65%. Bank loans were $41 million at year end.

Cash flow: Cash flows from operations reflected lower sales on top of an increase in deferred terms to assist farmers' on-farm cash flows but were still positive for the 2015-2016 year generating $14.4 million, compared to $34.8 million in 2014-2015.

More like this

LIC ready for challenges ahead

Herd improvement company LIC says it's well-positioned for the challenges ahead and remains focused on its core purpose - delivering value for farmer shareholders.

Breeding heat-tolerant cows for Africa

LIC is embarking on a ground-breaking project aimed at breeding heat tolerant and disease resistant dairy cows for Sub-Saharan Africa, in collaboration with the global leader in precision breeding, Acceligen, and the Bill & Melinda Gates Foundation.

Scheme to pick high potential 'underdog' bulls

Holstein Friesian NZ, and herd improvement co-operative LIC have launched a joint sire proving scheme that aims to select and prove Holstein Friesian bulls for New Zealand dairy farmers.

Featured

Boost for hort exports

The horticulture sector is a big winner from recent free trade deals sealed with the Gulf states, says Associate Agriculture Minister Nicola Grigg.

Better animal genetic gain system

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.

SIDE 2025's new schedule, venue

Annual farmer gathering, the South Island Dairy Event (SIDE), is set to make history as it heads to Timaru for the first time.

Taranaki piggery goes solar

Installing 400 solar panels at their Taranaki piggery and cropping operation will have significant environmental, financial and animal welfare benefits for the Stanley family.

National

OSPRI's costly software upgrade

Animal disease management agency OSPRI has announced sweeping governance changes as it seeks to recover from the expensive failure of…

Machinery & Products

BA Pumps expand

Cambridge based BA Pumps & Sprayers, specialists in New Zealand-made spraying equipment, has acquired Tokoroa Engineering’s product range, including the…

Entries open for innovation award

Fieldays and its renowned Innovation Awards are celebrating their 57th year, marking a longstanding tradition in the agricultural calendar, with…

» Latest Print Issues Online

Milking It

Chinese strategy

OPINION: Fonterra may have sold its dairy farms in China but the appetite for collaboration with the country remains strong.

Not fair

OPINION: The Listener's latest piece on winter grazing among Southland dairy farmers leaves much to be desired.

» Connect with Dairy News

» eNewsletter

Subscribe to our weekly newsletter