Landcorp dividend poor return on assets

The state’s farming business Landcorp is paying a dividend of $27.5 million  compared with $18m last year.

That is an impressive figure in isolation but not in relation to the company’s $1,663,000 $1,663,000,000 of assets.

A return of only a little more than 1.6% on assets isn’t unusual for farms but it is an appalling return for a State Owned Enterprise.

Landcorp isn’t one of the assets National is proposing for partial sale. Nor should it be. The protracted sale of the Crafar farms show how difficult it would be to sell as going concern and the company would be a very bad buy – it is forecasting a dividend of only $15m next year..

But having $1,663,000 tied up in an operation which provides such a poor return on investment is not good use of public money.

The best strategy isn’t sale of the company as a whole but a gradual sale of the farms leading to the eventual winding up of the company.

6 Responses to Landcorp dividend poor return on assets

  1. $27.5 million from $1.6 million of assets seems alright to me!

    😉

  2. homepaddock says:

    Whoops – I missed some zeroes. It’s $1.6 billion.

  3. ploughboy says:

    and the nzsuper fund i heard are doing due diilgence on dairy holdings.

  4. Roger Barton says:

    Ok so the cash back to the “people” equals around $6.11 per person. That will subsidize some of their milk costs at the corner dairy won’t it. In summary Landcorps financial effort is not monumental BUT they do make contributions in other areas. Personell development, learership training, health a safety protocols on farm etc. So there is probably a larger contribution than we credit for. Is it a great investment… well that is a different arguement!!

  5. homepaddock says:

    Landcorp does do some things well but that doesn’t mean owning farms is the best use of $1.6b.

  6. fredinthegrass says:

    Surely, Hp, it is obvious with a return like that, land is grossly overvalued. Who in business in their right mind would invest capital for 1.6%? Our own land trebled in value according to the ‘market’ in a very short time. Trouble was production already being pushed could in no way match that increase – Answer – sell and invest at 7% tax and fee paid. And still have time to do paid work.

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