Landcorp is sticking to a $35 million profit forecast for the full year, even though farms right through the North Island are drying off, with some pastures look "pretty barren" with little rain recently.
However, favourable growing conditions and record milk prices saw state-owned farming company Landcorp make a $12.2 million profit in the December half-year, up from just $2.5m in the same period a year before.
Landcorp chairman Bill Baylis said the company came through last summer's drought - the worst for 70 years - "in good shape".
"We anticipate a strong result for 2013/14, barring any sharp reversal in conditions or market price trends during the second half [of the year]," Baylis said.
Landcorp chief executive Steven Carden said yesterday they were still sticking with the $35m forecast for now, though North Island farms had seen little rain in the past few weeks. "The last two weeks have really dried things off in the North Island from the Wairarapa, central North Island, Waikato through to Northland - it is all very dry, " Carden said.
The dry conditions meant dairy herds may need to be dried off early, which would affect Landcorp dairy production, now accounting for a large part of the total business.
"Feeling a bit nervous with the outlook for the weather," Carden said.
Landcorp also said yesterday it was cutting back on new investment in the dairy sector, and aiming more for productivity gains on existing operations and managing dairy farms for others.
There were no plans to sell off dairy farms.
Since July last year, Landcorp has been operating the farms owned by Shanghai Pengxin Group and dairy production for the December half-year was higher than budget. Shanghai Pengxin bought the 16 Crafar farms in 2012, but since the middle of last year they have been run with Landcorp staff and livestock.
The half-year report showed that revenues from milk in the six months were worth $74.8m, well up from $47.3m in the same period a year ago. That reflected a 3.5 per cent or so lift in dairy production, extra income from the Crafar farms, and a higher milk payout.
The Crafar farms were in a "pretty poor state" when Landcorp took over in the middle of last year, but there had been a big lift in production already, Carden said. Dairy returns for the current year, with Fonterra's forecast of $8.30 a kg of milksolids, were great news for the sector, Baylis said. In contrast to the big lift in dairy revenues, livestock revenues slipped slightly to $40m, from $43.8m previously. That reflected a lower number of trading stock being carried over winter, with less feed available after last summer's drought.
Despite assets of more than $1.7 billion and conservative liabilities of just under $350m there was no appetite to become more highly geared by borrowing more to invest. The half-year result included a $95m gain on livestock values, which reflected high values because of a rising dairy payout and would go down when the payout fell.
AT A GLANCE
Landcorp runs 1.6 million stock units on 137 properties around the country, covering more than 380,000 hectares of land.
The farms include sheep, beef, deer and dairy farms.
Of the 137 properties, the company leases 32 from other owners and hold a further seven in which the Crown has a direct interest.