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NZ Farming Systems reiterates guidance; higher prices make up for drop in output

Monday 17th May 2010

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NZ Farming Systems Uruguay, the company developing dairy farms in South America, reiterated its target for a full-year loss, saying higher prices will make up for milk production that will undershoot its forecast.

The company that’s managed and part-owned by PGG Wrightson expects to report an EBIT loss of not more than US$10 million, even though milk production will be 10% to 15% short of 80 million litres, which was the bottom of its forecast range.

Farming Systems is currently receiving 35 US cents a litre, equivalent to about $6.50 a kilogram of milk solids, it said in a statement today. That’s up from the 29 US cents it was getting in December. Production has declined in the wake of the previous year’s drought, which resulted in cows being lighter when they calved.

Shares of Farming Systems climbed 5.1% to 41 cents, trimming their decline over the past six months to 15%. Overhanging the stock has been the 10 million shares held by the receivers of Rural Portfolio Investments, which need to liquidate assets.

The company said reserves of feed and pasture quality are both “very good” heading into winter, with low prices for supplementary feed.

“We are in a good position to both sustain strong milk production levels from autumn calvers and to build condition on spring calvers in the lead-up to their calving,” Farming Systems said.

Rising livestock prices, on the back of higher commodity prices and the positive feed and climatic conditions in Uruguay mean the company is anticipating an increase in its own livestock valuation at June, providing “non-operating income after EBIT” in its full-year results.

Farming Systems has 31 milking sheds and was operating 29 of them in mid-May with two set to come into production with autumn calving cows.

Farming Systems has to defer development of its farms in late 2008 as the credit squeeze dried up availability of debt funding.

 

 

 

 

Businesswire.co.nz



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