Landcorp operates 122 farms, covering an area of 376,156 hectares (owned and leased). It runs 1.5 millions stock units, has a permanent staff of 599, 77 of whom are in its Wellington head office.
It’s last annual report showed it had total assets of $1.6b.
That is a lot of capital tied up and its return on that capital continues to be dismal:
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 percent 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 in the previous year.
Landcorp said 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, Landcorp said.
“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 said.
The high kiwi dollar continues to have a major impact on income from exporting, the company said.
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.
Even given that proviso, which isn’t unreasonable, keeping so much capital tied up in a company which makes such a poor return on it wouldn’t make sense in good times. It certainly can’t be justified when debt is such a concern in the face of continuing financial woes in most parts of the world.
The company should not be sold as a whole but the gradual and orderly sale of individual farms ought to be at least a medium term goal.