NZ Farming Systems predicts full-year loss on weak prices

Thursday 19th February 2009

NZ Farming Systems Uruguay, the company set up to export New Zealand intensive dairy farming techniques to South America, forecast a full-year loss on weak world prices for milk and feed costs during a drought.

The dairy farmer managed by PGG Wrightson today posted a first-half loss of US$8.9 million, from a loss of US$7.96 million a year earlier, the company said in a statement. Sales were little changed at US$8 million.

NZ Farming Systems was forced to increase spending on feed in the first half, with the worst drought in Uruguay in 30 years. At the same time, the price its milk fetched with sole buyer Conaprole sunk to 19 U.S. cents a litre from 40 cents. The company's full-year EBIT loss will be at the top end of the US$7 million to US$11 million range it gave in December.

"Uncertainty continues over prices for internationally traded dairy products, with expectations for a continuation of depressed commodity and financial markets and reduced economic growth globally," chairman Keith Smith said.

The shares fell 3.5% to 56 cents today and has tumbled about 60% in the past year.

The company put off raising more funds to expand its portfolio of dairy farms in Uruguay in the first half, citing difficult financial markets.

Turning all of its Uruguay land into productive dairy farms would require US$80 million to US$90 million. Smith said the company is in talks with banks to part fund the dairy conversion plans and may also sell some land to fund developments. The company has US$16 million of debt funding from Uruguayan banks.

The company won't pay a performance fee to Wrightson for the first half, after paying US$9.2 million in a year-earlier period.

Businesswire.co.nz

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