$10.3m loss for NPDC Tasmanian farms

04/10/2013

New Plymouth District Council’s investment in dairying farming in Tasmania has been a costly one with Tasman Farms reporting a $10.3 million loss.

That loss has clipped a further $5m off New Plymouth District Council’s perpetual investment fund (Pif) in the last financial year and contributed to a $3.9m deficit for the council.  . .

The fund, managed by Taranaki Investment Management Limited (Timl), was created from the sale of the NPDC’s Powerco shares in 2004 for $259m. It peaked in value at $324m in 2008 but is now only worth $212.4m, partly because of money the council has taken out in annual release payments.

Timl has conceded the fund is overweighted in Tasman Farms and has commenced the process to reduce its exposure. . .

We visited the farms at Woolnorth in North West Tasmania last month. They’re owned by the Van Diemen’s Land Company in which Tasman Farms is a major shareholder.

Woolnorth covers 16,800 hectares with 12 rotary and one herringbone dairy shed. Fiver are operated by sharemilkers and eight by managers. A 2,500 hectare heifer raising operation on the property manages 10,000 heifers.

It was an impressive operation but several of us wondered about the wisdom of it as an investment for a district council.

There was a very strong rumour while we were there that Fonterra was interested in buying the farms but the company says it’s not.

 New Plymouth-owned Tasman Farms, Van Diemen’s Land Co’s parent, wants to raise up to $A180 million, with at least $A100 million in fresh equity, and has attracted a potential suitor from China but won’t see Fonterra at the negotiating table.

The New Zealand dairy exporter, which reports its annual results today, will not invest in the Tasmanian farm upgrade, which has reportedly attracted interest from China Investment Corp, the $US200 billion sovereign wealth fund.

“Fonterra has a very strong relationship with VDL as their processing partner but our investment interests in Tasmania are focused on our factories at Spreyton and Wynyard, rather than farms,” a Fonterra spokeswoman says. “We are supportive of any suppliers who are looking to grow and develop their operations.” . . .

Tasmania is often compared to New Zealand. We saw a lot of similarities, and a lot of Kiwi staff and technology on the farms.

Farming is usually a good long-term investment but it takes a lot of capital with small or no returns in the short to medium term, especially if a large-scale development is planned which is what VDL is doing.

NPDC has learned this and if I was a ratepayer I’d be backing the sale.


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