Landcorp slashes FY15 earnings guidance on lower dairy payout

Wednesday 20th August 2014

Landcorp Farming, the state-owned commercial farmer, slashed guidance for 2015 earnings after falling global dairy prices prompted Fonterra Cooperative Group to trim its forecast payout to farmers.

The Wellington-based company expects net operating profit of between $8 million and $12 million in the 12 months ending June 30, 2015, down from a previous forecast of $20.5 million in its statement of corporate intent, it said in a statement.

"The decrease from the SCI forecast reflects the recent downward revision in Fonterra's forecast milk payment to $6 kg of milk solids," it said. "This forecast assumes there will be no adverse weather conditions, deterioration in the foreign currency of current market prices."

Landcorp issued the warning yesterday, before the latest GlobalDairyTrade auction which showed the mildest decline in five events as a gain in whole milk powder prices offset a drop in skim milk powder.

Commodities, dominated by dairy products, are central to New Zealand’s export returns and help drive the economy. Yesterday the Treasury cut its short-term forecasts for economic growth and tax revenue, citing weaker prices for export commodities. Still, it expects prices to stabilise near current levels, saying factors driving them lower are short term, not structural.

Landcorp, which manages 137 farms, more than tripled first-half earnings for the 2014 year as record milk prices drove up income from its dairy operations. In June, it said it expects 2014 net operating profit of $28 million to $30 million. The earnings are scheduled for release on Aug. 25.

BusinessDesk.co.nz

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