Hamilton-based dairy genetics heavyweight LIC's underlying net earnings have fallen by nearly $2.7 million in 2011-2012 compared with the previous year and its dividend has dipped.

Chairman Murray King said reasons included a $4.7m credit issued to members of the farmer co-operative who were early adopters of genomic technology, to compensate them for lower-than-predicted results.

Chief executive Mark Dewdney said another key factor was additional investment in research and development.

LIC's underlying net earnings declined from $17.65m to $14.99m, excluding the fair value profit of the elite biological assets and the related tax effect.

King said all profit was returned to LIC's 10,500 New Zealand dairy farmer owner-shareholders in either products, research and development or dividends.

LIC will pay a dividend of $11.99m this year to its co-operative and investment shareholders, representing 80 per cent of underlying earnings. This compares with $13.6m last year, and $7.3m the year before. The fully imputed dividends will be paid on August 24.

King said LIC continued to report a strong balance sheet with total assets including cash, software, land, buildings and bull teams of $260.5m, an increase of $23.6m over the previous year, with an equity ratio of 75 per cent.

Record demand for a growing range of products and services generated revenue growth of 10 per cent in 2011-2012, offset by the $4.7m credit, taking revenue for the year to $177m. King said the credit was paid to acknowledge farmers who took up LIC's early DNA product.

“They paid a premium for it and it didn't live up to our expectations, so effectively we refunded that extra.

"It didn't fail - it just didn't do as well as we expected it to. This is very new technology. We're at the forefront of this genomic discovery work internationally.

"At the end of the day, everything we do is for the benefit of our shareholders.”

As the technology developed, predictions were getting closer to what was being delivered, he said. "LIC [is] now demonstrating the gains in genetic merit the fledgling technology promised.”

A price freeze that LIC applied to all products in the 2009-2010 season, in recognition of the tough financial conditions on farms, remained in place for LIC's premier sires, with only small rises for Minda and herd testing.

ali.tocker@waikatotimes.co.nz

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