KEY POINTS:
New Zealand Farming Systems Uruguay today posted a net after tax profit of US$1.6 million ($2.3m) for the year to June 30, boosted by earnings of US$8m from milk sales, at record prices of about US40c a litre.
But the real winner appears to be PGG Wrightson, which has picked up a "performance fee" of US$13.6m ($19.61m) because of a total annual shareholder return of 43 per cent a year since establishment of Farming Systems in December 2006.
The listed company said that while it expected some easing of dairy prices from current levels, "the outlook through the medium to long term remains buoyant".
"In the short term the lack of a supply response due to high feed costs should see prices remain at current levels."
It said the enhanced prospects, and with the economics of further land acquisition remaining compelling it was likely to raise more capital in the next few months.
The company's $1 shares, initially sold at $1.50 though a public listing on December 18, were today listed as trading at $1.80. At June 30 the market capitalisation of the company was $425m.
The company said its other "income" was US$18 million - mainly from improvements in the value of livestock, partly driven by the global rise in dairy commodity prices.
The company spent US$84m buying a further 10,000 hectares of farmland, regrassing and redeveloping 22,000ha, getting 11 milking sheds operating by the end of the year, and doubling livestock numbers to 50,000 head.
The company said today the flow-on of record milk prices on land prices prompted it to accelerate its land purchases.
It was paid an average of nearly US40c/litre for its milk by Uruguay's major processor, Conaprole, but costs such as fertiliser more than doubled during the year and "peso appreciation" increased local costs in US dollar terms.
An unusually cold, wet winter followed by drought from January through May affected milk production and required purchase of additional feed, but good rain and a mild winter since early June had allowed pastures and feed levels to recover.
The 11 milking sheds operating at the end of June will be boosted to 30 during the current year and four pivots have been installed for irrigation systems and a further 12 are on order.
Of the company's 50,000 animals, 43,000 are dairy cattle, and priority had been given to purchasing dairy cows and heifers.
The milking herd was expected to increase rapidly from nearly 6000 at the end of June 2008, to 14,000 cows by June 2009 with 12,000 hectares of land in dairy production.
The strengthening Uruguayan peso, together with cost increases in oil and fertiliser, had led to 8.2 per cent consumer price inflation for the year to June.
The company said independent director, David Cushing was stepping down.
- NZPA
