Summary of financials:
- Total Revenue from Continuing Operations: down 3.0% at $171.9 million.
- Net Profit After Tax (NPAT) from Continuing Operations: $29.0 million, down 13.0% from the same period last year.
- Underlying Earnings forecast range at year-end: $17-22 million, being unchanged from the market update in August 2023.
Livestock Improvement Corporation (NZX: LIC) has released a solid half-year result for the 2023-24 financial year, despite revenue pressures in a reduced milk price environment.
LIC has declared a 13 cent per share special dividend from the proceeds of the sale of shares in UK company National Milk Records completed in late 2023.
The reporting showed a decreased revenue (down 3.0%) and profit (down 13.0%) compared to the same period last year. Board Chair Corrigan Sowman says the co-operative’s strong cash position provided a degree of resilience and that, relative to the current challenging economic conditions, he is pleased with the result.
The decreased revenue was driven by the lower milk price environment, as well as credits provided to farmers as a result of a recent semen quality issue.
“Farmers have had a challenging year as they’ve had to tighten their belts in response to a lower milk price payout. The stakes are high, but they continue to show resilience.
“As a co-op, it’s our job to support farmers to navigate these challenges, in particular, providing them with the right tools to breed the most sustainable and profitable herds, now and into the future.
“On behalf of the Board, we would like to acknowledge just how challenging this year has been, and extend our appreciation to farmers for their ongoing support and commitment to their co-op.
“A special thanks also to those farmers who showed resilience and patience as we navigated our way through the recent semen quality issue. We had not experienced an issue like that before, and our investigation into the cause of this is ongoing. The costs of the credits to farmers have been accounted for in this half year result.
“This year has really brought into focus the importance of cow efficiency. Ensuring that our national dairy herd is made up of high producing, efficient cows is key to maintaining the success of the dairy sector.
“Recently, Fonterra announced it is targeting a 30% intensity reduction in on-farm emissions by 2030. We have an important role to play in supporting farmers to meet these targets and we are proud to be part of the solution. Targeting a reduction in emissions intensity cements our ongoing focus on cow efficiency – we don’t need more cows, we need better cows,” says Sowman.
Within the reporting period, demand remained steady for LIC’s animal health products, to keep cows healthy, productive and protected.
“Farmers continue to see the value of investing in animal health products and premium genetics, which indicates they are planning around the current and future needs of their herds. It is reflective of farmers’ shared commitment to breed and milk the best cows,” says Sowman.
“Collectively, our co-op is committed to making continuous improvements for cow efficiency. Small improvements made now add up to long term gain for more efficient and climate-friendly cows,” says Sowman.
Other highlights from the reporting period include the advancement of LIC’s heat tolerance programme, which aims to provide farmers with the ability to have high genetic merit dairy cows with improved heat tolerance. The programme is currently in its next stage – investigating how slick-coated animals fare in winter. The research will be critical to ensure that the co-op can provide farmers with a solution that equips cows for the challenges of a changing climate.
LIC’s methane research programme is also progressing well, and the co-op hopes to produce a methane breeding value and give dairy farmers the opportunity to access low methane elite genetics by 2026. This has the potential to make a real difference to farmers by helping to ensure emissions reductions don’t come at the cost of reducing milk production.
The co-operative confirms it is on track to deliver a year-end result in line with expectations and guidance previously provided to the market.
Looking ahead, Sowman says LIC’s focus now turns to delivering a solid result at year-end, whilst continuing to support and create value for its farmer shareholders.
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LIC points to possible cause of semen quality issue and commits to improvements
21 February 2024
LIC has informed its farmer shareholders that the investigation into the semen quality issue that impacted 1,127 herds in October last year has concluded the possible cause to be a bacterial contamination.