Livestock Improvement Corp sinks into the red

Livestock Improvement Corp [NZAX: LIC], the farmer-owned dairy herd genetics, farm software and automation cooperative, dipped into the red in 2016 as farmers scaled back spending because of the dairy downturn, which weighed on the value of the company's elite breeding herd.

LIC posted a loss of $4 million, or 13.6 cents per share, in the 12 months ended May 31, compared to a profit of $13.7 million, or 46.3 cents per share, a year earlier, it said in a statement. That included a $3.7 million net write-down in the value of its bull team, reflecting lower expectations on the sector's future revenue. Stripping that out, underlying earnings were a loss of $300,000 on a 9.4 percent drop in revenue and grants to $210.6 million.

"Lower milk prices have impacted on-farm buying decisions as many farmers look to reduce costs and indeed go into survival mode through difficult financial times facing dairy farmers," LIC said. "This decrease reflects the prolonged New Zealand dairy industry downturn and the continued investment by LIC on R&D and core technology for the medium to long term future."

LIC is looking at its capital structure, having proposed splitting the company in two to create a genetics/farm management cooperative, working with New Zealand's dairy farmers, and a new agri-technology firm that would put LIC's agri-tech activities into a new corporate structure and potentially be open to outside investors.

The company today said it conducted an investor roadshow in June to discusss capital structure changes and will give an update at the October annual meeting once the board has considered shareholder feedback.

The board didn't declare a dividend "as a result of the company not achieving positive underlying earnings this year".

LIC's non-voting investment shares, which are listed on the NZAX, last traded at $2.60 and have dropped 36 percent this year. The investment shares are restricted to dairy farmers holding cooperative shares with voting rights and LIC employees.

(BusinessDesk)

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