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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.
LIC chief executive David Chin says meeting the revised methane reduction targets will rely on practical science, smart technology, and genuine collaboration across the sector.
Opening a new $3 million methane research barn in Waikato this month, Agriculture Minister Todd McClay called on the dairy sector to “go as fast as you can and prove the concepts”.
The Government has announced it has invested $8 million in lower methane dairy genetics research.
The first calves of a new crossbred dairy-beef offering are now on the ground at a Pamu (Landcorp) farm near Taupo.
Academic and former Fonterra director Nicola Shadbolt has been elected as LIC director.
One of Fonterra's largest milk suppliers says Fonterra's board and management have got what they wanted - a great turnout and a positive signal from shareholders on the sale of its co-operative's consumer and related business.
Wool farmers are hoping that efforts by two leading companies to develop a more efficient supply chain would eventually boost farmgate returns.
Acclaimed fruit grower Dean Astill never imagined he would have achieved so much in the years since being named the first Young Horticulturist of the Year, 20 years ago.
The Ashburton-based Carrfields Group continues to show commitment to future growth and in the agricultural sector with its latest investment, the recently acquired 'Spring Farm' adjacent to State Highway 1, Winslow, just south of Ashburton.
New Zealand First leader and Foreign Affairs Minister Winston Peters has blasted Fonterra farmers shareholders for approving the sale of iconic brands to a French company.
A major feature of the Ashburton A&P Show, to be held on October 31 and November 1, will be the annual trans-Tasman Sheep Dog Trial test match, with the best heading dogs from both sides of the Tasman going head-to-head in two teams of four.
