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Livestock Improvement swings to a full year profit as bulls gain in value

Thursday 20th July 2017

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Livestock Improvement Corp, the dairy herd genetics cooperative, turned to an annual profit after its biological bull team was revalued sharply higher and it was upbeat about the current financial year. 

Net profit was $20.8 million in the 12 months ended May 31, compared to the prior year's loss of $4 million. This includes the annual revaluation post tax of the biological bull team of $17.7 million, compared to a write down of $3.7 million in the prior year. The valuation of the bull team is based on a model that looks at future revenue streams and costs associated with the current bulls owned, discounted back to current value, LIC said. 

The revaluation was "relatively significant" this year, reflecting increased confidence for the future year's milk price and resulting sales, reduced costs and a more rigorous approach to forecasting developed alongside consultants, it said. 

According to LIC, the genetic gain the bull teams deliver to farmers is calculated to be worth more than $250,000 to an average sized herd over 10 years and deliver about $300 million annually to the national economy.

The cooperative said its underlying net earnings - excluding the increase on the fair value of the biological assets and related tax effects - were $3 million versus a loss of $300,000 in the prior year. Revenue was $203.5 million, down 3.4 percent on the year. 

A full year dividend of $2.43 million will be paid on Aug. 18 to cooperative and investment shareholders, representing 80 percent of underlying earnings. 

Looking ahead, it said in conjunction with improved industry conditions, a more positive milk price and its ongoing transformation programme "further improvements are expected in the 2017-18 financial year." 

LIC's  investment shares, which are listed on the NZAX, last traded at $2.40. They have shed 8 percent over the past 12 months. 


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