KEY POINTS:
Dairy farm operator NZ Farming Systems Uruguay continues to buy up land in the South American country, while eyeing opportunities across the border.
NZ Farming Systems was set up by PGG Wrightson to develop dairy farm operations in Uruguay and was floated on the stock exchange in December.
The company has bought another 4400ha of farmland in Uruguay during the current half-year, taking its total holding to 36,300ha.
Chairman Keith Smith said the cost of land was rising but the entry price was still low and the economics of development attractive.
The land purchased came at an average price of US$3700 (4692) a hectare.
Taking neighbouring farms already owned by the company, the average price for all acquisitions so far was US$2601 a hectare.
"Some of the price difference reflected the fact that land being acquired was more developed than the company's earlier acquisitions and its proximity to existing [NZ Farming Systems] land," Smith said.
PGG Wrightson group general manager financial services Michael Thomas said comparable land in New Zealand could cost between US$45,000 and US$50,0000 a hectare.
Land would continue to be bought provided the economic case remained compelling and the company would also consider buying in neighbouring countries.
NZ Farming Systems said it would consider raising more equity to fund acquisitions.
Shares closed up 6c yesterday at $1.96. The company confirmed a profit after tax forecast for the year ended June 30 of US$1.5 million. The figure excludes a performance fee payable to PGG Wrightson for which pre-tax US$9.2 million had been accrued.
Uruguay had been hit by dry conditions during the previous six weeks, with some cows dried off earlier than planned and expected milk production during the six-week period cut by about 25 per cent.
The rise in international commodity prices and a flow-on effect to fuel and fertiliser had put pressure on operating costs, while a weakening greenback had increased the cost of some services paid for in local currency.
But a rise in milk price to about US40c a litre - equivalent to $7.35 a kilogram of milk solids - had more than offset the higher costs.
