LIC seeks $125m debt facilities this year, targets $140m equity over decade

Livestock Improvement Corp [NZAX: LIC], which aims to lift annual revenue to $1 billion by 2025, says it plans to establish $125 million of debt facilities this year and is likely to require $140 million in equity capital over the next 10 years to meet its growth goals.

Details of its capital requirements are included in a presentation the bull semen and dairy genetics database manager is taking around the country to explain to its shareholders how its changing focus, with increased capital spending and new product development, is changing its financial profile. Previously it has only required seasonal debt funding, typically for three months, the presentation shows.

"Even with debt, [there is a] high likelihood, if LIC delivers on strategy and value on farm to farmers, that additional capital will be required in early 2017," it said.

The Hamilton-based company plans to establish a $50 million term facility and $75 million seasonal debt facility this year, it said. Capital spending is expected to run at about $25-35 million a year through until 2020, it said.

The 2025 revenue target is a substantial increase from current sales, which are running at about $200 million a year, and would be driven by growth of its existing business, new product launches, acquisitions and growth offshore of its Minda herd records service, Protrack farm automation solutions and its Dairy Automation milk testing sensors.

So far this year the company has entered a research and development partnership with Dutch agricultural company Lely Group, whose local unit designs sensors for animal health and production, and entered into a deal with 'cow intelligence company' SCR Dairy to distribute its technology into new regions including Belarus, Israel, Russia and Turkey. In December, LIC acquired a majority stake and exclusive supply to its Brazilian genetics distributor, NZ Brasil Genetics Producao Animal. Strategic growth decisions yet to be made include whether to enter the Chinese market.

The company says in the presentation that it has been assisting its dairy farmers during a period of low prices with three-month, interest-free deferred payments on artificial breeding and 24 months interest-free on its Protrack, DAL and GeneMark products.

LIC shares are a closed market on the NZX and are only available to its shareholder-farmers. They were last at $4.80 and have declined 38% in the past 12 months.

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