Low prices dent Rural Equities earnings

23:05, Sep 02 2012

Lower milk, sheep and wool prices pushed farm-owning group Rural Equities' operating earnings for year to June 30 down to $2.9 million from $5.1m in the previous year.

However, directors said they were pleased with the operating performance as the group's six dairy farms achieved record milk production.

The group said that total comprehensive income for the 2012 financial year was $15.8m, up from $3.3m in the year to June 30, 2011.

The substantial increase reflected growth in the value of the group's rural property portfolio.

The June 30 valuation of the property portfolio increased by $14.3m over the prior year. Of the group's 29 properties, 14 are located in Canterbury, where valuations increased considerably.

"The Canterbury farm valuations increased on average by 14.9 per cent while the remaining farm valuations increased by 2.7 per cent," Rural Equities executive chairman David Cushing said.

"This reflects the particularly strong rural real estate market in that province and resulted in the group's total assets being in excess of $200m."

Rural Equities is New Zealand's only publicly traded rural land ownership company and was spun out of North Island-based Williams & Kettle in a reconstruction in 2004.

Net asset value per share as at June 30, 2012 was $4.47, a 13.2 per cent increase from $3.95 as at June 30, 2011.

A fully imputed dividend of 5 cents per share would be paid to shareholders. The dividend record date will be November 16 and the payment date will be November 28.

During the year the company's directors undertook a strategic review of the group's rural property portfolio recognising that it had been held largely unchanged for ten years.

Following that review, four properties that were owned for more than 22 years have been sold or have unconditional sale contracts in place.

One block of the Waimahaka property, near the Manawatu Gorge, and the Ngaruawahia forest block were settled prior to 30 June 2012.

Ernsdale in South Canterbury, Cedars in Mid Canterbury and the other Waimahaka block would settle during the financial year ending June 30, 2013, Cushing said.

Gross proceeds from the sale of these four properties would be $17.9m.

"Rural Equities directors were pleased with progress made following the strategic review which has enhanced the overall quality of the portfolio," Cushing said.

"The group's strategy, to invest in properties within the portfolio, continues."

During the year a $1m capital expenditure project was completed at the Rocklea dairy farm in Canterbury.

"Three centre pivot spray irrigators replaced the border dyke system," Cushing said.

"The benefits of this irrigation conversion are already significant with Rocklea forecasted to produce an additional 60,000 kilograms of milk solids, a 25 per cent increase, over the next two years."

Cushing said Rural Equities was in a strong position with its portfolio of rural properties and low debt levels.