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Livestock Improvement profit down 43%

Friday 30th July 2010

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Low milk prices at the peak of Livestock Improvement's peak season pushed underlying net earnings for the genetic materials firm down 43% to $9.13 million in the year to May 31, the NZAX-listed company announced today.

Stripped of the fluctuating impact of changes in the fair value of its most valuable asset, its $73 million bull team - the result was achieved on turnover of $136.4 million, 9.2% lower than the previous year.

LIC chairman Stuart Bay described the year as "a game of two halves", in which LIC had produced an "extremely good" result, given market conditions.

"The bulk of LIC's income is derived during the spring peak of each season and, in 2009, this was a low pointfor the industry, with prospects for pay-out in the $4.50 to $5 per kilogram of milk-solids range.

"The resulting concern and farmer caution was reflected in reduced sales volumes and revenue for LIC," Bay said.

LIC had offered support packages to help farmers manage through the downturn with additional discounts and deferred zero interest payment terms that cost the firm around $2.5 million during the year. 

Budget control and a freeze on all company wages and salaries had helped weather the difficult trading environment.

The company remains lightly geared, with an 8-0% debt-equity ratio, and a 7% increase in operating cash flows over the previous year of $28.7 million.

Having revalued the bull herd by $12.5 million in the previous year, the most recent period saw a reduction of $1.1 million in "fair value of biological assets."

Inclusive of biological asset valuations, the net profit for the year was $8.3 million, compared with $24.7 million the year before, giving earnings per share in of 28 cents, compared with 84 cents the previous year.

Dividends worth $7.3 million, representing 80% of underlying earnings, have been declared. The company has two classes of shares, so that cooperative control shareholders will receive dividends of 8.65 cents per share, and while investment shares will attract a 23.5c dividend per share.

LIC shares last traded at $3.10 and have not traded today.

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