Livestock Improvement lifts first-half earnings
Livestock Improvement Corp, the dairy herd genetics cooperative, lifted first-half earnings as it focused on cost cutting and forecast a return to profit for the full year.
Net profit increased 21% to $19.3 million, or 65.3c a share, in the six months ended November 30, 2016, from $15.9 million, or 53.8c, a year earlier, the Hamilton-based company said in a statement yesterday. It forecast a return to a "modest level of profitability" for the full year, after posting a $4 million loss last year.
Livestock Improvement's fortunes are closely linked to the farmers they serve and a slump in milk prices had seen dairy farmers reduce spending on its services, hurting the business. Chairman Murray King said it had been a "tough environment" over the past few years, although the company had weathered the storm, made "some tough but necessary cost reduction measures" and was "in good shape" to face the challenges ahead.
"We've scrutinised every part of the business to actively manage and minimise our operating costs and look for better ways of doing business, with minimal impact to farms or where possible improving it," King said. "This focus will continue through the rest of the year and beyond."
He cited the company's initiative to optimise the routes of artificial breeding technicians, which will reduce its fuel bill by 1.3 million kilometres and increase the time the technicians spend on farms, the increased use of digital publications and the move to offer farmers an additional source of income from sought-after value-added Wagyu beef semen.
Livestock Improvement's revenue from ordinary activities fell 8.7% to $130.3 million. The company won't pay a first-half dividend, noting that its business, particularly artificial breeding, is highly seasonal, incorporating the majority of its artificial breeding revenues but not a similar proportion of total costs and therefore wasn't indicative of its second half or full year result.
The company's genetics business, its largest unit providing bovine genetic breeding material and related services to dairy farmers, posted a 7.9% drop in pre-tax profit to $44 million in the first half, as revenue declined 8.3% to $70.6 million.
Its farm software business, which provides data recording and farm management information services, lifted pre-tax profit 11% to $15 million as revenue edged up 1.8% to $19.8 million.
The farm automation technology business boosted pre-tax profit 49% to $8.2 million as revenue increased 6.5% to $12.8 million. Its smallest business, which offers herd testing and animal recording for pastoral farmers, lifted pre-tax profit 22% to $3.7 million as revenue advanced 6.8% to $9.7 million.
The company said cash flows from operations improved to negative $433,000 from -$17.5 million a year earlier, reflecting stronger cash collections and lower operating costs.
LIC's non-voting investment shares, which are listed on the NZAX, last traded at $2.56 and have dropped by a third in the past year. The investment shares are restricted to dairy farmers holding cooperative shares with voting rights and LIC employees.