NZ Farming Systems forecasts 2010 EBIT loss US$10-15 million, smaller loss in 2011

Thursday 3rd December 2009

NZ Farming Systems Uruguay, which is developing dairy farms in South America based on intensive New Zealand farming techniques, forecast pretax losses for the next two years while noting a pick-up in milk prices.

Based on a milk price of about 20 U.S. cents a litre, the EBIT loss for the current year will be US$10 million to US$15 million, the company said in its November newsletter, released to the NZX today. A smaller loss is expected for 2011, it said, without giving details. It couched the outlook statement in the parlance of being “comfortable” with analysts’ estimates.

Farm-gate prices in Uruguay climbed to 24 U.S. cents a litre in October, from below 19 cents at the end of last year.

“We would expect further increases as the benefit of sales contracted at current higher international price levels are achieved by Conaprole and flow through to the farm gate,” it said. “International dairy prices are much more favourable than originally expected, however we do anticipate significant ongoing volatility.”

The benefits of improved milk prices, though, are being undermined by a strengthening Uruguayan currency, it said. “As with New Zealand, the Uruguayan peso has also strengthened significantly, offsetting part of the benefit of international dairy price increases.”

Farming Systems sells all of its output through Conaprole, Uruguay’s national milk cooperative.

Shares of Farming Systems last traded at 46 cents and have declined about 24% this year.

Businesswire.co.nz

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