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Landcorp pays special dividend on sale of Westland shares

Friday 30th August 2019

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Landcorp Farming, which trades as Pamu, will pay a $5 million special dividend to the government from its gain on the sale of its Westland Dairy Cooperative Shares. 

The state-owned farmer held about 3.25 million shares, or 4.5 percent, of the Hokitika-based cooperative, which it sold to Inner Mongolia Yili Industrial Group for $3.41 per share, or about $11.1 million. Landcorp's shareholding ministers are Finance Minister Grant Robertson and associate SOE Minister Shane Jones. 

Westland shareholders agreed to the $588 million sale to Yili in July, with more than 90 percent support. The offer was a premium to an independent valuation range of 88 cents to $1.38, and included commitments to collect their milk for the next 10 years at a price that was at least the same as Fonterra's. 

Jones offered a $9.9 million loan on attractive terms to Westland via the Provincial Growth Fund to help fund the dairy processor build a new manufacturing plant for higher-value products, but that was withdrawn because of the Yili deal. 

Last month, Jones said Overseas Investment Office rules needed to be changed to make sure farmers don't keep selling the nation's birthright. 

"I, as steward of the Provincial Growth Fund, was never approached (by Westland directors) as to whether or not we could look at restructuring and help shore up that company. That was never an option put to us," he said at the time. 

Instead, the government is getting $5 million of the $11 million sale. 

Landcorp's board declared the dividend despite the farmer reporting weaker underlying earnings from the slowdown in milk production. 

Earnings before interest, tax, depreciation, amortisation and revaluations dropped to $34 million in the 12 months ended June 30 from $48 million a year earlier. That was slightly ahead of the $27-32 million range provided in May, which was downgraded from an earlier forecast of $37-42 million. 

The state-owned enterprise reported a loss of $11 million, due to a $22 million unrealised loss in the fair value of livestock and forestry assets. That compares to a profit of $34 million a year earlier, which included a $25 million revaluation gain. 

"While our net profit suffered from the impact of the valuation write-downs, and our revenue was impacted by lower milk production due to drought, the continued focus on reducing costs, and generating acceptable returns will be a key focus in the current year," chair Warren Parker said in a statement. 

Revenue fell 2.4 percent to $241 million as weaker farm gate milk prices dented Landcorp's dairy revenue, and as weather extremes dented production. Carbon revenue was also lower. 

The company said Melody Dairies, of which it owns 35 percent, is on schedule and budget in building a milk drying facility near Hamilton to start processing in July next year. Its Spring Sheep Dairy brand is attracting growing international demand and its Focus Genetics business is supporting livestock productivity gains, it said. 

Parker said the company is still committed to achieving better returns from premium prices and reducing its environmental footprint.

"We are also focused on ensuring we can deliver a positive overall performance irrespective of the usual vagaries of weather and commodity prices," he said. 


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