FLLYR: LIC: Farmer coop announces year end result

30 Jul 2010 8:42 am

LIC 30/07/2010 FLLYR

REL: 0841 HRS Livestock Improvement Corporation Limited (NS)

FLLYR: LIC: Farmer coop announces year end result

Year end result reflect of market - dairy coop

Farmer cooperative, Livestock Improvement Corporation (LIC) today announced its annual results for the final year ending 31 May 2010.

Making the announcement, LIC Chairman Stuart Bay said the result was an extremely good one considering the tough environment that affected the dairy industry during the peak of the season.

"The 2009/10 year was another 'game of two halves' for the dairy industry and LIC. The bulk of LIC's income is derived during the spring peak of each season and, in 2009, this was a low point for the industry with prospects for payout in the $4.50 - $5.00 per kg ms range. The resulting concern and farmer caution was reflected in reduced sales volumes and revenue for LIC," he said.

"In that context, this years result was an extremely good one, reflecting constraint and containment across the entire business and as an outcome of working closely with our farmer customers.

"Where dairy fortunes go, so do ours, and LIC was one of the first to announce a package of support to help farmers manage through the downturn. This support package, of additional discounts and deferred zero interest payment terms, cost approximately $2.5 million during the year. Our priority was on preserving relationships with customers and protecting our business; we achieved on both counts."

At the same time, LIC initiated a cost cutting exercise, which saw all budgets revised and a nil pay increase for all LIC staff.

"Throughout the year, LIC continued to expand its diverse range of products and services and continued to invest significantly in science, technology and product development, which will ensure that New Zealand dairy farmers remain at the leading edge of dairy production in the future."

Financial Result Revenue for the 2009/10 year was $136.4 million (2008/2009 $150.3 million), which represents a decrease of 9.2%.

Reduced sales volumes resulted in a decrease in earnings before interest and tax of $4.2 million or 20%, to $16.8 million. Underlying net earnings decreased by $6.8 million or 43%, to $9.1 million.

The strength of LIC's balance sheet continues with total assets, including land, buildings, bull and stag teams, of $223.7 million (an increase of $0.2 million), with an equity ratio of approximately 80%.

The 2009/10 year generated strong operating cash flows of $28.7 million, an increase of 7% over the previous year, and equivalent to 21% of revenue. Investment was $9.5 million for the year.

The company had no term debt at the end of the year. Dividend LIC will distribute a dividend to shareholders of $7.3 million representing 80% of underlying earnings, to its Cooperative and Investment Shareholders. This translates to 8.65 cents per Cooperative Control Share and 23.5 cents per Investment Share. The fully imputed dividend payments will be made to Shareholders on 27 August 2010. This represents a gross yield of 11.2 % on Investment Shares.

Summary Stuart Bay said the result and investments made in the 2009/10 year position LIC well for the medium to long term as the dairy industry recovers from the current downturn and moves into a growth phase.

"The dairy industry is in recovery mode, and though the prospects for the future are good, farmers appreciate that volatility of international milk prices is here to stay. They are very cost conscious and need to see that every dollar invested delivers an acceptable return. That logic is behind everything LIC does."

ends

For further information contact Clare Bayly, Communications Manager, LIC, phone 027 499 8862. End CA:00197800 For:LIC Type:FLLYR Time:2010-07-30:08:42:05

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