Eroding share of milk worries Fonterra shareholders
Fonterra shareholders are concerned with a further decline in the co-op’s share of milk collected in New Zealand.
Subject to the outcome of legal proceedings in the Supreme Court, Landcorp and Shanghai Pengxin intend forming a joint venture company, Milk New Zealand Farm Management Ltd, to operate the farms and explore other opportunities for growth in dairy production in this country.
"We will provide livestock and operational capabilities to achieve substantial improvement in the farms' economic, environment and social performance. Shanghai Pengxin will be an active investor, and the two parties will share revenues and operating expenses" say the directors.
The initiative is part of Landcorp's strategy to build on progress over the past decade, and to deliver on the company's mission "to be New Zealand's best livestock farmer, economically, environmentally and socially".
As previously reported, Landcorp made a net operating profit before tax of $27 million for the year ended June 30, 2012. The company will pay a $20 million cash dividend to the shareholders, funded from operations.
In the annual report, chief executive Chris Kelly says Landcorp has comprehensive development plans for the Shanghai Pengxin farms which encompass a total of 5689 effective hectares in locations around the central North Island and Hawkes Bay.
"The joint venture partner intends investing $15.5 million over three years to lift production to around 5 million kg of milksolids per annum," says Kelly. "Further investment of $3.2 million will follow. Landcorp will assume day-to-day management responsibility for the portfolio. Existing share milkers will operate through the current season."
Kelly says other Landcorp developments will involve enlargement of existing dairy complexes as opportunities arise. Current plans include further conversions from forestry on Wairakei Estate, where the company currently has 4500ha in dairy production, and expansion of the Maronan Pastures complex, near Ashburton.
Landcorp continues also to seek production gains on its dry stock farms, now fully recovered from droughts in 2007 and 2008. In particular, the Cheltenham Downs property acquired in the Manawatu in 2010/11 has proved a valuable addition to sheep and beef finishing operations in the North Island. During the latest year, Landcorp took another big step into lamb supply for Northern Hemisphere customers on fixed price contracts as part of an integrated value chain approach.
Kelly says Landcorp will continue with strategies for higher productivity through livestock genetic advancement, precision irrigation and application of information technologies. Optimised land use and environmental protection are other key strategies. Landcorp is developing comprehensive plans for each of its farms, extending plantation forestry and retiring further areas of particular environmental value.
In 2011/12, the company supported Government-led protection of Lake Taupo water quality through agreements to withdraw completely from livestock farming in the lake's catchment area.
Kelly says employee development, along with health and safety, remain high priorities for Landcorp (573 full-time permanent employees at 30 June 2012). "100% safety' is promoted as a core value among Landcorp employees, with all encouraged to think about their safety on the job," he says.
The company will continue with extensive raining activities for capability development among employees and for accident prevention.
Landcorp's forecast net operating profit for 2012/13 of 12.7 million is predicted on price trends and exchange rates set at the time of completing the budget.
The 2012 Landorp Farming Annual Report can be obtained from www.landcorp.co.nz/financial-statutory-information or tel. 04 381 4050.
