Landcorp Farming forecasts wider annual loss, no dividend

However, the forecast is based on Fonterra's previous payout expectation, which it has since increased.

Landcorp Farming, the state-owned farmer, has forecast a wider annual loss and no dividend for the current year, reflecting low growth in its milk and livestock revenues and increased spending for longer term gain.

The Wellington-based state-owned enterprise predicted a net operating loss of $13.1 million for the year ending June 30, 2017, from a loss of $9.4 million a year earlier. However, the forecast in Landcorp's 2016 annual report is based on Fonterra Cooperative Group's earlier expectation that it would pay farmers $4.25 per kilogram of milk solids, which the dairy company later raised to $4.75/kgMS on expectations lower supply will bolster prices.

Weak global milk prices have hurt the earnings of dairy farmers such as Landcorp, with prices slipping below what most need to break even. To help counter the downturn, Landcorp has been pulling back on dairy farm conversions, and exiting sharemilking contracts to focus on developing higher-value products such as sheep milk.

While Landcorp is budgeting for a loss, the company retains a strong balance sheet and the capacity to invest in initiatives for transformation and future profitability, it said.

At the end of the company's June 30, 2016 financial year it had $219.6 million of debt and $1.79 billion of assets. It owned 158,561 hectares of land and managed 226,942 hectares.

(BusinessDesk)

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