AgResearch cuts blamed on need to boost profit margins

By Owen Hembry

AgResearch says it's cutting science jobs because of a downturn in some sectors and a need for more profit.

"It's just our margin's too low for us to really keep our head above water," said chief executive Andrew West.

The crown research institute plans to save about $5 million this financial year and is targeting annualised salary savings of about $2.4 million - equivalent to about 3.5 per cent of the total salary bill.

West said operating profit for the past financial year was negligible.

Corporate operational expenditure had already been cut by more than $2 million, he said. "By taking these measures we anticipate a more satisfactory profit will be achieved in the current financial year."

AgResearch's revenue for the year ending June 30 was $149.3 million with profit before tax of $3.1 million.

"We are downsizing our scientific staff complement and will review our corporate staff complement thereafter in order to ensure that we maintain sufficient profitability."

The company was asking for voluntary severance of scientific staff but did not know how many jobs would be lost.

West said factors influencing the belt-tightening included a downturn in important client industries of sheep and beef, a commitment to under-funded scientists and maintaining rare animal genetics that exceeded capacity, and commercialisation costs higher than budget.

"There's just less levy money around," he said.

"Sheep farmers have got to cut their cloth accordingly in terms of what they can spend on R&D."

Sheep farmers have had three years of low returns and animal numbers were down 11 per cent in the year to June 30, to 34.2 million.

Public Service Association national secretary Richard Wagstaff said New Zealand could not afford to cut the jobs of scientists whose research helped generate more than $10 billion of exports a year.

"The PSA is totally opposed to laying off any scientists at AgResearch," Wagstaff said. "[It] is devastating for the scientists and a waste of talent and investment."

Fewer scientists would mean less research, West said.

"If you go through this sort of exercise then it has an impact on morale and that means it has an impact on productivity."

AgResearch was targeting about 8 per cent annual revenue growth and would continue to raise the pay of scientists by an average annual rate of 6.5 per cent.

By December the company would have commissioned nearly $60 million of new labs and glasshouses, with assistance from Massey University, West said. "We are choosing to do this in order to maintain scientific and technological quality at international standards."

- NZ Herald

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