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Landcorp slashes full year 2015 earnings guidance on lower dairy payout

Landcorp Farming, the state-owned commercial farmer, slashed guidance for 2015 earnings after falling global dairy prices prompted Fonterra Co-operative Group [NZX: FCG] to trim its forecast payout to farmers.

The Wellington-based company expects net operating profit of between $8 million and $12 million in the 12 months ending June 30, 2015, down from a previous forecast of $20.5 million in its statement of corporate intent, it said in a statement.

"The decrease from the SCI forecast reflects the recent downward revision in Fonterra's forecast milk payment to $6 kg of milk solids," it said. "This forecast assumes there will be no adverse weather conditions, deterioration in the foreign currency of current market prices."

Landcorp issued the warning yesterday, before the latest GlobalDairyTrade auction which showed the mildest decline in five events as a gain in whole milk powder prices offset a drop in skim milk powder.

Commodities, dominated by dairy products, are central to New Zealand's export returns and help drive the economy. Yesterday the Treasury cut its short-term forecasts for economic growth and tax revenue, citing weaker prices for export commodities. Still, it expects prices to stabilise near current levels, saying factors driving them lower are short term, not structural.

Landcorp, which manages 137 farms, more than tripled first-half earnings for the 2014 year as record milk prices drove up income from its dairy operations. In June, it said it expects 2014 net operating profit of $28 million to $30 million. The earnings are scheduled for release on Aug. 25.


Comments and questions

This is an SOE. Please could someone tell me why, after it abandoned the original purpose of L&S, there is any need for the taxpayer to be exposed to the vagaries of farming. Aren't we exposed enough with out competing with private farmers for land and resources?.

Im absolutely with John Morrison. Private, energetic, enterprising, individual farming family ownership is the only way.

The current scenario is completely opposite to what National is meant to stand for or represent.

Because if they sell Landcorp assets, then Maori get major claims in South Island

You say ".... Maori get major claims in South Island" Pardon?
Are you implying landcorp are now utilising not taxpayers assets, but rather Maori property for the "benefit' of taxpayer?
Please elucidate or are you "taking the mickey"??

What a joke. $1.7 billion in assets. $1.5billion equity and a return of less than 1% even ib the great times 2%.

These guys claimed that corporate farming worked when Bill English pointed out it never has. These returns prove it.

For those kiwis who missed out on the crafer farms etc Landcorp could sell up.

Why sell shares in a company generating good returns to get a $ billion when you can sell this rubbish.

Profits would improve as you would not have the corporate overheads.

This is not good news for rural New Zealand. Those little towns that are already looking very tired and quiet economy wise are going to be doing it very hard this season. Any farmer with substantial debt must be getting worried and will be hoping there will be no more interest rate rates in the foreseeable future. As for those who say the economy is going gang busters. Just go ask any retailer whether he agrees with that comment. What we now need is a labour/green government to get us back on track.

What we need is ACT.

This time I totally agree with J Morrison. It is so ironic to hear Nathan Guy's reasoning around his position to Meat Industry reform in that he can't interfere with private business models. Landcorp does exactly that, their purchasing and their selling power is directly at the expense of smaller and individual family farm operations. It is a further anomaly that they have now morphed into a foreign policy arm of the National Party and this does raise some interesting potential queries around the Lochinvar deal?

The only reason the Govt can't sell LANDCORP is the Maoris will claim it all. They already have detailed a number of Landcorps sales.

If you want to improve Landcorps profits slash the 100+ jobs in its head office. Gliding On all over again

Yep, Ngai Tahu first right of refusal on all Crown assets derails all chance of Landcorp breakup.
Best idea is to offer management leases to young farmers who can't afford first farm.....just collect the rent.

"First right of refusal' you say. At market value? If so, nothing wrong with that. Let it go. Why not? The colour of the owner matters not a whit. As long as he is on a level playing field, commercially, legally and socially, with all other farmers in NZ.

137 farms that more than tripled first half earnings. In the NZ farming situation this is such a stupid statement. Most ,if not all farming income arrives in the second half of the year.

The whole Landcorp scenario is completely at odds with what should be the free enterprise system. A national government as well?