Olam plans active role in NZ Farming Systems

By Owen Hembry

NZ Farming Systems was set up to develop dairy-farm operations in Uruguay. Photo / Supplied
NZ Farming Systems was set up to develop dairy-farm operations in Uruguay. Photo / Supplied

Global agricultural company Olam International has boosted its stake in NZ Farming Systems Uruguay, prompting speculation it is in prime position for a takeover bid.

The company won't comment on whether it has ambitions to take control but says it will take an active role in the business.

Olam's global head for coffee, dairy products and commodity financial services, Vivek Verma, said: "We only invest in companies where we can add value either on the board or as a shareholder."

NZ Farming Systems was set up to develop dairy-farm operations in Uruguay and floated on the NZX in 2007.

Singapore exchange-listed Olam last week increased its shareholding from 14.35 to 18.45 per cent after buying 10 million shares from the receivers of secured assets in Rural Portfolio Investments.

Olam's increased shareholding brings it closer to the 20 per cent that would trigger a takeover offer.

When asked if it wanted to takeover NZ Farming Systems Olam said that as a listed company it was not able to discuss specific details on its forward plans.

"But as a substantial shareholder in [NZ Farming Systems Uruguay], our role is to work with the company along with its board to take the company to its fullest potential," Verma said.

Uruguay fitted into the company's growth strategy for dairy because New Zealand-style pasture management could be applied and adapted to suit the climate, Verma said.

"It also has lower land, labour and other overheads costs compared to other large dairy exporting countries like the US, Europe, Australia and New Zealand.

"Uruguay has the potential to be one of the world's most cost-competitive milk producers."

NZ Farming Systems chairman John Parker said the company had talked with Olam.

"We haven't really had enough discussions yet to know with any precision how they might help," Parker said. "But they've certainly expressed views that they would like to."

Last week NZ Farming Systems confirmed a projected earnings before interest and tax loss of a maximum of US$10 million for the financial year.

However, the company said it expected a substantially improved performance in the next financial year.

"There's plenty of chairmen who go out there with pap and bullshit - I'm not one of them," Parker said. "The company has been underperforming, unquestionably underperforming."

Parker has been chairman of NZ Farming Systems for about six months and is also chairman of Port of Tauranga. "Luckily I'm damn sure it will [do better] and I wouldn't have taken on this job if I didn't think it could."

There had been legitimate excuses, including drought and low dairy prices, he said.

"But we didn't manage it as well as we should have either, and those improvements are all in place now."

NZ Farming Systems would need more capital to complete its development and could issue bonds in Uruguay, bring in new equity and sell dry stock farms, Parker said.

NZ Farming Systems shares closed steady at 40c on Friday.


Olam International:

* Based in Singapore.

* Set up in 1989 and listed on the Singapore exchange in 2005.

* Global supply chain manager of agricultural products and food ingredients.

* Sources 20 products, with a direct presence in 64 countries, supplying more than 10,600 customers.

* Businesses include cocoa, coffee, cashew, sesame, rice, cotton and wood products.

* S$7.5 billion of revenue for the nine months ending March 31.

- NZ Herald

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