NZ Farming Systems outlook improves, independent chairman installed

Thursday 17th December 2009

NZ Farming Systems Uruguay Ltd, the South American dairy farm developer, trimmed its forecast annual loss amid rapid gains in dairy prices and said chairman Keith Smith will step down in favour of an independent director. The shares jumped.

The company expects to post an EBIT (earnings before interest and taxation) loss of “no more” than US$10 million, down from a forecast range of between US$10 million and $15 million, as dairy prices continue to improve. Farm-gate prices in Uruguay climbed to 24 U.S. cents a litre in October, from below 19 cents at the end of last year.

In a separate statement, the company announced Keith Smith stepped down as chairman of the company to make clear the separation between Farming Systems and 11.5% shareholder PGG Wrightson. Independent director John Parker will take Smith’s place, and Smith will remain on the board.

“The boards of both companies have routinely excluded individual directors from discussion of any matters on which they might be conflicted, and I believe it is desirable for the separation of interests to also be reflected in the leadership of the two boards,” Smith said in a statement. “While I have decided to stand down as chairman, I look forward to continuing as a director and making a further contribution to the company’s development in that capacity.”

In October, PGG Wrightson trimmed its management fee to 0.75% from 1% for running Farming Systems’ 18 farms after institutional investors and Uruguayan bondholders put pressure on the rural services company. The price of whole milk powder has surged 95% since July on Fonterra’s online trading platform, and has underpinned gains in the price of raw materials produced in New Zealand.

Still, Fonterra’s global trade manager Kelvin Wickham doubts the current price is sustainable, and predicts it will fall next year when the American and European farming season begins. The shares climbed 4.3% to 49 cents on the NZX today and have slumped 20% this year.

Businesswire.co.nz

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