Eld – old age; former times; the past.
Black Heels and Tractor Wheels Podcasts are a Rural Women NZ initiative in which they share stories from a range of women around New Zealand.
Keri Moore runs two dairy farms with her partner and has recently completed a Kellogg Rural Leadership Programme with a research paper based on defining success for rural women today.
A review of Landcorp Farming, one of the Government’s biggest three state-owned enterprises, is critical of its failure to meet financial forecasts, its high corporate costs, and its investment in unprofitable off-farm ventures.
The report by James Morrison Consulting follows a Government request in 2020 for an independent review into Landcorp’s performance. The report was completed in March and released on Thursday after a request by Stuff under the Official Information Act.
Would the report have been released at all without an OIA request?
It comes after Treasury rejected Landcorp’s own review from its internal auditor PricewaterhouseCoopers, saying it had no input into that review and it didn’t address the underlying reasons for the gap between Landcorp’s forecast and actual performance.
The latest report notes tensions in the relationship between the Treasury and Landcorp, and Landcorp has rejected many of its findings. . .
Year after year there is a gap between forecasts and performance and year after year, Landcorp’s return on investment is abysmal.
Under the leadership of chief executive Steven Carden, who left on Friday after almost eight years at the helm, Landcorp has rebranded as Pāmu and has been trying to shift its focus away from selling agricultural commodities, towards developing higher value niche products.
Some of those investments, including its sheep milk joint venture Spring Sheep Dairies, its Pāmu Foods division, and its stake in Waikato milk dryer Melody Dairies, are yet to produce a return, and were criticised in the report.
“The transformation of Landcorp from a pastoral farming enterprise into a diversified business with multiple land uses and downstream investments, is not without risk,” the report said. “It is not clear that Landcorp is a natural and necessary owner for these ventures.”
Why would a company with such a poor return on capital invest in other enterprises rather than focusing on improving what is supposed to be its core business?
Landcorp had over-estimated revenue growth and underestimated the risks involved, it said.
The review questioned the export marketing and distribution of Spring Sheep nutritional products and suggested Landcorp should be looking instead for its farms to supply sheep milk.
It noted Pāmu Foods had not met any of its 2017 business case targets, had high overheads, cost the business $4.6 million by 2019, wrote down milk powders by $3.76m in 2019 which were sold as stock food, and changed its model from sales to consumers to contract manufacturing for businesses. . .
Shareholders of a private business would have much higher performance expectations why doesn’t the government?
Landcorp’s principal objective under the SOE Act was to be as profitable and efficient as comparable businesses that were not owned by the Crown, which it was not when compared with companies such as Dairy Holdings and Southern Pastures, the report said.
Landcorp had negative total shareholder returns between its 2016 and 2020 financial years of an average 0.8 per cent, below the long-run average for farming of positive 1.9 per cent, the report said.
It criticised Landcorp’s higher corporate costs, and rejected some of the reasons behind that, saying only seven of the company’s 32 ‘industry good’ projects could be validated, and that the suggestion that adopting ‘best practices’ placed an additional financial burden on Landcorp had not been demonstrated or quantified. . .
Landcorp rejected the review’s recommendation that it should remove a reference to its corporate costs being higher than a unitary farm operation, arguing private sector companies did not have to carry out Pāmu’s public sector compliance requirements, undertake industry-good activities, or meet licence-to-operate standards of a government-owned entity.
The report criticised Landcorp’s frequent changing of strategy and targets, which it said made it difficult to hold the company to account for long-term commitments made in prior periods.
Landcorp said its board did hold management to account for business plan targets, but rejected the suggestion that its strategic goals should remain static, saying it needed to be agile in responding to its external operating environment. . .
Farm sale proceeds were recycled into the ventures, which had a negative impact on the earning capacity and scale of the farming divisions, and increased the company’s debt, the report said.
“Landcorp should be seeking excellence in pastoral farming”, which was the main economic engine for the business, the report said.
“However the evidence indicates Landcorp is not an excellent farmer yet. Although there is some promise that Landcorp could be excellent, especially in differentiated production systems, this focus is lost with the investments outside beyond the farm gate,” the report said. . .
The report raises many questions including why so much land is still owned by the government.
Some of the farms are being held as a land bank for Treaty settlements.
But they won’t require all the land and that is not an excuse for poor performance on any of them.
Another question is why was a report completed in March only released months later after an OIA request?
Lucky for the government it took so long and that the story was published two days before Christmas when it would receive far less attention than it ought to have.