Allied Farmers shares jump 16% on earnings upgrade

Allied Farmers shares jumped 16% after the rural services firm gave a rosier view on annual earnings due to a better than expected performance from its livestock division.

The Hawera-based company said pre-tax profit was between $1.4 million and $1.6 million in the year ended June 30, up from $1.11 million a year earlier. The final result will be released on by August 29. The shares climbed 0.7 of a cent to 5c, valuing the company at $8.3 million.

"A large portion of NZ Farmers Livestock's income is budgeted to be received in May each year, due to the timing of dairy herd sales," chairman Garry Bluett said. "The performance of the livestock division has exceeded expectations and, as a consequence, the Allied Farmers result for the six months ended June 30, 2016, is expected to be in the range of $600,000-700,000  and this is expected to materially and positively affect the full year result."

Allied Farmers has been focusing on its livestock division, having largely wound down the residual assets from its acquisition of the Hanover and United Finance loan books in 2009. The dairy downturn weighed on the company's earnings last year as an uncertain farmgate payout caused some farmers to refrain from buying livestock.

The company today said it has paid the second tranche of a scheduled acquisition of Hawke's Bay-based Redshaw Livestock, taking its stake to 34%. A final installment will be made next July, which will give Allied Farmers' NZ Farmers Livestock unit a 52% share of the business.

The NZ Farmers Livestock unit has also set up a new subsidiary to provide livestock financing and is in the process of finalising a funding facility for the business.

"This business is being formed to target focused livestock financing and will enable NZ Farmers Livestock to conduct and bring in-house some of the financing operations that it has previously outsourced, and is expected to be a positive contributor in the 2016/2017 year," Allied Farmers said.

(BusinessDesk)

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