Landcorp set to pay govt fatter dividend as earnings improve

Landcorp set to pay govt fatter dividend on improved earnings

By Paul McBeth

July 28 (BusinessDesk) – Landcorp Farming Ltd., the country’s biggest farmer, is set to pay a fatter dividend to the government after surging commodity prices underpinned a doubling in forecast operating earnings.

The State-owned farmer’s board has agreed to pay a $27.5 million full-year dividend to the government, up from $18 million previously budgeted after flagging a much stronger operating result. That comes after it missed making an interim dividend payment, and had previously said it needs an increase in land values to meet the desired shareholder return.

Landcorp says it made an operating profit of between $40 million and $45 million in the six months ended June 30, about twice the $20 million expected in its first-half result in March.

“This improved financial performance results from industry-wide improvements in product prices which more than offset the adverse effects of climactic events,” the company said. “Milk production recovered from early season dry conditions to finish the season slightly ahead of budget due to a very favourable summer and autumn.”

The state-owned enterprise reported a $3.2 million profit in the six months ended Dec. 31, turning profitable from the first-half loss in 2009.

That comes as surging commodity prices, led by Asian demand for dairy products, underpin the country’s economic recovery, which has Reserve Bank Governor Alan Bollard looking at removing the emergency stimulus he injected in response to the Canterbury earthquakes. Bollard today kept the official cash rate at 2.5%.

Landcorp was valued at $1.3 billion in the government’s 2010 investment statement, making it the seventh-biggest state-owned enterprise, and larger than the public’s stake in national carrier Air New Zealand Ltd. Prime Minister John Key has flagged a desire to sell-down the government’s holdings in some SOEs, though Landcorp wasn’t in the group of companies tagged.

The sale of farmland to foreigners has been a thorny issue in the past couple of years after the ill-fated bid by Hong Kong’s Natural Dairy (NZ) Holdings to buy the Crafar family’s dairy portfolio roused nationalistic sentiment. Landcorp made an unsuccessful bid for the farms, though that was trumped by China’s Shanghai Pengxin Group.

The opposition to the Crafar farms sale forced the government to do a U-turn in its review of the Overseas Investment Act, resulting in Ministers having the power to veto large scale ownership of farmland and vertically integrated companies in primary production.

(BusinessDesk)

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