Wednesday, 17 February 2016 15:55

Low payout erodes LIC’s profit

Written by 
LIC chair Murray King. LIC chair Murray King.

The low milk payout has dented farmer co-op LIC's half-year results.

For the six months ending November 30 2015, LIC's total revenue was $145 million, 9% down on the same period last year. Net profit after tax (NPAT) was $15.9 million, down 46%.

LIC had earlier signalled the New Zealand Stock Exchange about reduced earnings as a result of the lower forecast milk payout and reduced spending onfarm.

It is now expected that the year-end result will be closer to a breakeven position, chairman Murray King says.

"The season's lower forecast milk price has created challenging financial situations for many dairy farmers, and as a co-op we are closely linked to that.

"This result is a reflection of that, and as we continue our essential capital expenditure programme; it is very much in line with what we anticipated in October although we now expect the year-end result to be closer to a break-even position.

"We continue to actively manage and minimise costs, without impacting our service to farmers. It's times like this when service becomes even more important, so we are hugely focussed on that. We have made significant reductions in our operating costs over the last six months and these will be sustained through the rest of the year."

LIC has continued to invest in its information systems, to enable improved service delivery as well as faster development of new innovations, to help farmers make real-time decisions and to add value onfarm. This is reflected in the lower NPAT, from increased depreciation costs.

King says the artificial breeding (AB) season remained relatively strong, with the co-op supplying genetics to breed at least 75% of the national herd.

"As expected we have seen farmers revise their budgets, but most were still willing to invest in solutions that will deliver a return for their businesses, and the herd improvement services we offer are a key to that.

"We focussed on providing top quality and good value genetics, software and farm automation offerings."

LIC's business, particularly AB, is highly seasonal. Half year results incorporate most of the AB revenues but not a similar proportion of total costs, and so are not indicative of the second half nor the full-year result. No dividend is declared at half year.

LIC continues to operate a strong balance sheet with total assets including cash, software, land and buildings and bull teams of $371 million.

Cashflows from operations were a negative $17 million reflecting extended terms given to farmers to assist their cashflows.

This contrasts with cashflows from operations of $6.6 million in the first half of last year.

More like this

LIC's $18m windfall

Farmer co-op LIC will pay $18 million in dividends to shareholders after a strong full-year result.

Surviving, thriving this

Winter may have just begun but most farmers are already looking ahead to the next season and the one beyond that.

Quality beef bulls wanted

Making quality beef genetics easier for dairy farmers to access is the aim of a new industry partnership.


Water reforms come at a cost

The government’s new freshwater laws, signed off this week, have the potential to create significant unnecessary costs for ratepayers, farmers and entire communities, Federated Farmers says.

2020 harvest yields up

Final harvest data for wheat, barley and oats (milling/malting and feed) in 2020 show yields were up 17% overall across the six crops.


Difficult but the right call

DairyNZ chief executive Dr Tim Mackle says the joint decision three years ago to eradicate Mycoplamsa bovis was a difficult call.

Milking cluster milks runner-up award

DeLaval has come away with the runner up prize in this year’s Fieldays Online innovation competition with a new milking cluster that eliminates the need for conventional liner changes.

Glow worms to cows

Thomas Lundman's work focus has gone from tracking tiny critters in pitch black caves to looking after considerably larger animals in paddocks near Whakatane.

» Latest Print Issues Online

The Hound

Spell check

Your old mutt was not surprised to see the NZ Dairy Industry Awards hastily remove the title of this year’s…

About time!

Your canine crusader has been a long-time critic of NZ governments – of all stripes – who, for the past…

» Connect with Rural News

» eNewsletter

Subscribe to our weekly newsletter