Dairy downturn drives LIC into the red

Wayne McNee, Livestock Improvement Corp chief executive.

The dairy downturn has driven farmer-owned co-operative, Livestock Improvement Corp (LIC), into the red.

The NZX-listed company, which is the domestic dairy industry's main bull semen provider, has announced a $4 million loss for the year to May compared with a profit of $13.7m a year earlier.

"This decrease reflects the prolonged New Zealand dairy industry downturn, and the continued investment by LIC on research and development and core technology for the medium to long term future of our industry," the company said in a statement.

LIC said it had started discussions with shareholders about future potential capital structure changes aimed at allowing the business to grow.

This included discussions as to the future capital funding requirements of a separate agritech business.

The company said it had made substantial cost reductions during the year through reducing expenses such as travel and training, focusing capital on investments in key areas only, extending working life of assets and recruiting only essential personnel.

The result included the annual revaluation required under accounting standards to "fair value" of the biological elite bull team which, this year, resulted in a decrease net of tax of $3.7 million to a value of $87.5 million in 2015-16 compared to a value of $92.6 million in 2014-15.

"This reflects lower expectations around future revenue consistent with the industry outlook," it said.

LIC said it would not pay a dividend this year. In 2014-2015 the dividend paid was $6.6 million -- 60 per cent of underlying net earnings.