Friday, March 29, 2024

LIC back in black

Avatar photo
Dairy genetics group LIC is back in profit, most of it coming from a revaluation of the company’s breeding bulls.
Reading Time: 2 minutes

This is a turnaround from the write-down of values last year.

LIC was back on track, with dairy farmers continuing to invest in services and solutions, chairman Murray King said.

The co-operative group’s bottom line was a profit of $20.8 million for the year ended May 31, compared with a loss of $4m a year earlier.

On an after-tax basis, $17.7m of profit was the non-cash lift in bull values ($3.7m write-down previously) and $3.10m from cash earnings, against a $300,000 loss earlier. The operating earnings before interest and taxes (Ebit) result was $8.07m, up from $2.08m.

After missing out last year, the co-op and investor shareholders will receive a dividend – 6.44c a share, with full tax credits.

Only the co-op shareholders can own the NZAX-listed investor shares. The directors are reviewing what they see as a disparity between the two share classes and expect to put a proposal for a “fairer’’ structure to shareholders early next year, King said.

He described operating profitability as modest, with strong performances in the core artificial breeding and herd testing divisions, and a reduction in operating costs across all parts of the business.

“While we are very pleased to be back in the black, we are still actively working to minimise our costs so that we can weather future challenges that may arise.”

King said that the breeding bull team improved in quality every year.

DairyNZ had calculated the genetic gain delivered to farmers was worth more than $250,000 to an average-sized herd over 10 years, and worth about $300m annually to the national economy.

The vast majority of this country’s dairy cows carried LIC bloodlines, King said.

The latest revaluation was significant because it reflected increased confidence for future years’ milk prices and resulting breeding sales, reduced costs, and a more rigorous approach to forecasting.

During the year, LIC had also launched and continued to invest in the MINDA LIVE online version of its farm management system, used by more than 90% of dairy farmers. There had been a good take-up of the online service.

Outside of core services, there had been an effect from reduced farmer spending, with sales of the GeneMark DNA parentage and LIC Automation systems still well-below peak 2015 levels. LIC’s International business had good genetic sales in the United Kingdom and Ireland, King said.

Total revenues fell to $199m from $205m a year earlier. However, operating cashflows improved to $25.35m from $14.43m, with reductions in materials buying and staff expenses. Research and development spending was also slightly lower.

At balance date, LIC had total assets of $341.4m, up from $323.6m. Borrowings were $32m, down from $42m. This meant the ratio of debt to total debt plus equity was lower at 31.6%, from 34.8% a year earlier.

The dividend will be paid on August 18.

Total
0
Shares
People are also reading