Lack of water hurts NZS
New Zealand Farming Systems Uruguay (NZS) has revised down its 2011/12 forecast to a loss of US$3 million (NZ$3.86m) to US$5 million (NZ$6.44m) with production hindered by drier-than-expected summer and autumn conditions.
The NZX-listed firm says it is hurrying with irrigation installation on its dairying land to mitigate any dry weather, but is only about halfway through that process, meaning milk levels have been below forecast and calving is also down.
The revision has been greeted with concern by minority shareholder Barry Brook, who said while the company was blaming a dry autumn for the reduced milk production he understood a lot of the irrigation infrastructure was already in place.
"So they are running out of excuses," he said.
In late February NZFSU, which develops and runs dairy farms in Uruguay, said it expected to break even on an earnings before interest and tax (ebit) basis in the full year to June 30.
Brook is a former chief executive of PGG Wrightson, which set up NZFSU before the company was separately listed on the NZX.
Ownership changes have seen Olam take an 85.93 per cent stake, according to the 2011 annual report.
Yesterday managing director David Beca said while operating and overhead expenses in the second half of the year would be lower than planned, the consequences of the lower milk production was the projected ebit loss of between US$3m and US$5m before any livestock fair value adjustment.
At the half year the company had taken an upward fair value adjustment on stock of around US$5.5m, meaning the company was likely to report a bottom line result "break even position including the fair value adjustment".
The value of stock had increased due to Uruguay milk industry returns including exports to China, and because farmers had been producing more milk.
Returns had been reasonably steady with NZFSU being paid 39-40 US cents a litre by the main Uruguayan producer Conapro.
However, some dairy farmers were seeing lower prices given global commodity price falls.
"It's not impacting yet on us."
- © Fairfax NZ News
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