Landcorp reports 36% drop in full-year operating profit

BUSINESSDESK: Landcorp, the country's biggest farming company, says its operating profit fell 36% and is forecast to halve in the current year, with prices expected to be generally lower.

The state-owned farmer said its "net operating profit" fell to $27 million in the 12 months ended June 30, from a record $42 million on the same basis a year earlier. Sales fell 4% to $210.5 million.

The decline in operating profit mainly reflected the impact of "significant reductions" in prices for milk and timber in a year when sales fell even as the volumes produced rose. The company will pay the government a dividend of $20 million, down from $27.5 million the previous year.

Landcorp says net operating profit for 2013 will be about $13 million, based on current product prices.

The current year's product prices are expected to be "more volatile and generally lower" than in 2012.

"This will reflect the continued negative impact of the global financial crisis on demand in European, North American and Asia economies, and particular supply and demand factors in markets for wholesale milk products," it says.

The high kiwi dollar continues to have a major impact on income from exporting.

Net profit, the earnings measure required to be disclosed by listed companies, was a loss of $9.4 million from a year-earlier profit of $114.6 million, reflecting changes in unrealised revaluations on livestock, derivatives and land.

Like many other New Zealand companies, Landcorp downplayed the net profit figure as being "not a meaningful indicator" of its operating performance.

Since New Zealand adopted the International Financial Reporting Standards there has been a proliferation of non-standardised earnings measures, where companies back out items that aren't directly to do with operations.

Landcorp first flagged the $20 million dividend and $27 million operating profit at the start of the month, when it reported record annual milk production of 13.3 million kilograms of milk solids. It had previously forecast profit on that basis of $16.3 million.

Landcorp has entered an agreement with China's Shanghai Pengxin to manage the 16 central North Island farms formerly owned by the Crafar family.