Farmlands back in black

The co-operative recently announced a $17.1m net profit before tax and rebates – 34% up on the previous year – in its 2022 annual result. That will allow it to return an $11.9m gross ($8.6m after tax) shareholder distribution, the first return to shareholders in four years, and almost double the gross distribution of $6.2m provided in 2018. Houghton, who has been in the job 15 months, says the result was due to a combination of factors, not just around income.

“We are very mindful that as a buying group for New Zealand farmers our cost of operation needs to be reflective of the fact that we are a low-margin business,” she told Rural News.

“And there were opportunities for cost saving last year in terms of operational costs and we took those opportunities.”

Houghton adds that was not at the cost of the employees.

“We did streamline the executive team and took some senior roles out but we certainly haven’t made redundancies generally.”

She says Farmlands consciously invested in its team, lifting base pay rates, and paying a combined $950,000 bonus across all permanent team members.

“One of the things Farmlands back in black we’ve done in the last 15 months is really come back to focus on our core reason for being – and our absolute core reason for being is to support New Zealand famers and support profitability on farm.”

But it was “fair to say” Farmlands hadn’t been doing as good a job as it could and the core objective now was to do better, she said.

Meanwhile, Farmlands Chair Rob Hewett told the company’s recent AGM that it is returning to a position of financial strength at a time when New Zealand agriculture is faced with a lot of rapid disruption.

“We have a clear plan on how we will deliver greater value to our shareholders over the long-term. We are focused on our core role of providing critical inputs to New Zealand farmers and growers and embracing the growing new lifestyle customers connected to the land.” Houghton says that while end-of-year profit distributions are an important way for Farmlands to support funds being reinvested in New Zealand agriculture, the monthly rebates provided through the Farmlands Card and in-store shareholder purchases are the most significant and regular way the rural supplies co-op delivers value.

In 2022, it returned $94.3m in monthly rebates during the year – an increase of $5m on the year before.

“We are working to ensure that Farmlands is consistently profitable and returning regular distributions to our shareholders from here on in,” she says.

“As we continue to manage industry uncertainty, we do not expect straight line growth in distributions – there will be some bumps. As our business improvements start to have a positive impact over the next two to three years, we expect to see our profitability and shareholder returns increase.”

As a Kiwi recently returned from a number of senior roles in Australia, Houghton told Rural News she was excited to be involved in a business where she could make a difference to a sector and to “New Zealand Inc”.

She says the agricultural sector is “a bloody amazing place to have a career,”

“I’m just loving, being part of it.”