LIC’s annual meeting saw the board and senior leadership team reflect on a tough past season where the dairy improvement co-operative faced both financial and operational challenges.
Reflecting on the co-operative’s financial performance at the meeting on September 18 in Hamilton, LIC chair Corrigan Sowman emphasised LIC’s ability to deliver a sustainable profit and a solid return for its shareholders despite a challenging economic environment.
“We are proud to have closed the year with a respectable profit of $7.7 million and a total dividend of 18.84 cents per share, thanks to prudent management and a strong balance sheet with no debt.”
Sowman acknowledged the headwinds the sector may face but expressed confidence in LIC’s resilience and future potential.
“Our co-operative is well-positioned for the challenges ahead. We remain focused on our core purpose: delivering value for our farmer shareholders. This goes beyond short-term gains – our decisions today shape the future of New Zealand’s national herd.”
The co-operative forecasts underlying earnings of $16-22m for 2024/25, barring any significant external factors.
LIC chief financial officer Brent Mealings said there was an understandable reaction to the significant decrease in Fonterra’s forecast milk price by its shareholder customers in August and September last year.
Total revenue was down 3.3% on last year driven largely by a decrease in demand impacting volumes across key product and service lines.
“Our response was also to focus on controlling our costs across the business. The after-tax impact of the semen quality issue during the year was $1.5m.”
He said there were positive signs in the sector, where confidence is slowly rebuilding.
“However, it will take time for us to see the results as the short-term cash constraints on farm continue and farmers take a considered approach to spend.”
This was challenged by one farmer in the audience who questioned the senior management team on its performance.
Sowman told him the board took responsibility for past performance issues with sexed semen and while he did not want to make excuses, he said the past two to three years had been tough on all businesses.
“We’re both farmers and we know the extraordinary period of inflation that we have been through. The reality is, we haven’t had free cash.”
He was confident that the most recent investments LIC had made will lead to improvements in revenue.
“Will they ultimately respond to the headwinds we have with a declining cow population, I do not know that and we will have to continue to work hard on that.”
LIC chief executive David Chin acknowledged that the co-operative did not live up to being operationally excellent last year because of the issues it had with semen quality issue.
“Following a thorough investigation, we’ve been working hard to implement improvements across the semen processing business.”
He said winter mating went without a hitch, and he is confident there will be a successful calving season this spring.
“The performance of our sexed semen product has also been very good.
“Last spring, the non-return rate of fresh sexed semen was only 3% below conventional and over winter mating the non-return rate was 1.9% below the performance of conventional semen, for straws inseminated in the same herd on the same day.
“This is really pleasing as sexed semen will play a big role in accelerating genetic gain and allows farmers to get more heifer replacements from their best cows.
“Except for the semen quality issue, it was a very good year operationally for LIC.”
The meeting saw Mike O’Connor elected as director for the North Island region and Tony Coltman as director for the South Island region as well as Kirsten Watson elected as the Upper North Island territory shareholder reference group (SRG) representative.
The SRG is an elected and appointed body of shareholders established to promote shareholder interests and assist LIC to deliver on its purpose and vision.
