NZ Farming Systems forecasts wider loss on feed costs, delayed farm sale

Tuesday 2nd November 2010

NZ Farming Systems Uruguay, the dairy farm developer controlled by Singapore’s Olam International, said its operating loss will be about triple its budget estimate.

Farming Systems expects an operating loss before interest and tax of US$16 million this financial year, compared to a budget forecast loss of US$5 million. On the same basis it had a loss of US$8 million last year.

The EBIT loss excludes $4.6 million to break its contract with former manager PGG Wrightson. The deteriorating outlook comes from rising feed costs and reduced first-quarter production after a tough winter, and a squeeze on cash as a pending farm sale was delayed, causing the company to put off its fertiliser investment.

“If present dry conditions continue there may be some further downside risk,” the company said in a statement. “Capital fertiliser application is now underway on the lead farms and irrigated land, with further significant applications planned across land for autumn 2011.”

Olam is reviewing the company’s business plan and the process is expected to be finished in January.

At its annual meeting last month, Farming Systems told shareholders the company was running 10% below target of 100 million litres in annual milk production, though it didn’t flag any risk to earnings.

The company is predicting milk production of 85 million to 90 million litres this year.

The shares, of which Olam swept up 78% in its 70-cents-a-share offer, were unchanged at 61 cents in trading today.

Businesswire.co.nz

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