NZ Farming Systems Uruguay expects a bigger annual loss than previously forecast, as the company grapples with disappointing milk production and dry conditions at its South American dairy farms.Earnings before interest and tax were expected to fall signif
NZ Farming Systems Uruguay expects a bigger annual loss than previously forecast, as the company grapples with disappointing milk production and dry conditions at its South American dairy farms.
Earnings before interest and tax were expected to fall significantly short of the expected $US5 million loss for the year ended June 2011, to about $US16 million with further losses possible if dry conditions continue, the company said.
NZFS had also provided for a one-off $US3.5m cost of terminating a management agreement with PGG Wrightson, as previously announced.
First quarter milk production was about 10 percent below forecast and likely to remain so, with annual milk volume expected of around 85 to 90 million litres.
NZFSU had previously forecast production of around 100 million litres.
The price of milk was expected to remain around US32c per litre on average, compared with last year's US28.2c per litre.
Feed costs were also high. The farms were using bought-in feed following a difficult winter, and because of delays in applying fertiliser after funding dried up pending the sale of the Don Pepe farm.
Farm sale funds and short-term funding from Olam would be used for farm development, such as funding electricity, irrigation and fertilizer costs, as well as repaying PGG Wrightson.
Controlling shareholder Olam International, whose takeover offer succeeded in September, would ensure farming decisions were not hampered by a lack of cash, NZFSU said. The company has estimated it needs about $US60m to finish developing its existing farms.
Olam was reviewing the company's business plan, with a further update expected after the review finishes in January.
Shares in NZFSU last traded yesterday at 61c.
