Wednesday 24th July 2019
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Livestock Improvement Corp, the dairy herd genetics cooperative, more than doubled its full-year net profit and said it expects another strong result in the current year.
Net profit jumped to $22.2 million in the year ended May 31, from $9.3 million in the prior year. Underlying earnings rose to $19.5 million from $3 million and revenue was up 4 percent at $246.5 million.
The company plans to return $15.6 million in dividends to shareholders. The fully-imputed dividend equates to 10.98 cents per share and represents a yield of 12.2 percent, based on the current share price of 90 cents. The dividend is up from 1.71 cents last year and is the largest the company has paid since 2013.
LIC's prior year's result was impacted by one-off transformation costs of $20.8 million.
"While 2017-18 was a year of transformation for the co-op, including capital restructure and a strategy refresh, 2018-19 was about embedding its new innovation-led growth strategy with an ongoing focus on the core NZ dairy industry," chairman Murray King said.
Looking ahead, LIC expects underlying earnings to increase to $21-$25 million in 2019-20, assuming there are no significant climate events, milk price declines or any major biosecurity threats such as Mycoplasma bovis.
King said the result was in line with expectations and reflects a turnaround in the co-operative’s performance and profitability.
Sales from core products, including artificial breeding and herd testing, remained strong, with 5.68 million Artificial Breeding straws sold and 10.96 million milk samples processed. In the prior year it sold 5.2 million straws and processed 10.9 million milk samples.
“This result is further evidence LIC is in great financial shape. It means we are not only able to deliver a solid dividend to shareholders, but the business can also continue its significant investment in R&D and our digital transformation, and consider new options and opportunities to deliver innovation-led growth," King said.
LIC’s investment in R&D was $13.6 million, which equates to 5.5 percent of revenue and is well above the primary sector average of around 1 percent. It also received additional government funding to drive improvements in the health and well-being of the national herd and more sustainable milk production.
Among other things, more than $800,000 was invested in new measures to protect its customers from the Mycoplasma bovis cattle disease, including a world-leading daily testing regime for its bulls and significant changes to its herd testing operations.
LIC also purchased 64 hectares of farm land in the Waikato to expand its biosecurity quarantine facilities.
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