Fonterra has announced Fonterra Co-operative Support will add an additional 50 cents per shared-up kilogram of milksolids to support farmers this season. Photograph by Alan Gibson.
Fonterra has announced Fonterra Co-operative Support will add an additional 50 cents per shared-up kilogram of milksolids to support farmers this season. Photograph by Alan Gibson.
Finance Minister Bill English will not rule out the state farming company Landcorp having to sell more farms than usual to ensure it is not too loaded with debt.
But Labour leader Andrew Little warned that that could see large sales of productive farm land end up of foreign hands.
English also said all SOEs should be looking at whether they had assets that were not required for their businesses.
"We don't want them coming to the Crown asking for more capital. We expect them to be maximising the capital that they've got," he told reporters today at Parliament.
Landcorp, the former Department of Lands and Survey, owns 158,000ha of farmland in New Zealand and manages or leases another 226,000ha. It runs 1.6 million stock units (sheep, beef, deer and dairy) on 137 properties and has a staff of about 700.
English and State-Owned Enterprises Minister Todd McClay have expressed concern about their debt gearing in the wake of a slump in milk prices and in the financial disasters of the state-owned Solid Energy because of a slump in coal prices.
It also had contractual obligations from a deal struck in 2004 under the Wairakei Estates partnership to continue conversions from forestry land to dairy.
English said Landcorp, like any other farmer, was in the midst of re-doing its budget on the back of a new forecast payout but it was not asking the Government for more capital.
The company has assets valued at $1.6 billion but its half-yearly results announced in January recorded a net operating profit of just $1 million on a forecast $4.40 per kilogram of milk solids for 2014 - 15.
But prices have slumped further since then and Fonterra this month cut its farm gate price to $3.85 from a previous forecast of $5.25.
"There will be less income so they have to work out what that means," English.
No, we can't because depending on their issues, if they have to get capital, they will have to sell down some land.
Asked if he would rule out partial privatisation he said: "No, we can't because depending on their issues, if they have to get capital, they will have to sell down some land."
All SOEs had their own issues, English said but there were none he would say would not survive.
"NZ Post's business is shrinking, TVNZ has got to deal with competition from Netflix and everybody else, the Public Trust has got an old model that may not be as applicable, Kordia has got a set of broadcast-related assets when technology has moved on.
"There are others where continuing with business as usual seems to be working fine, like Airways or AgriQuality."
They should all be looking at whether they had assets that were not crucial to their business.
KiwiRail, for example, owned a lot of property but it was a rail company, not a property company, English said.
McClay: "It is not something we are significantly worried about but certainly Landcorp has about $1.6 billion worth of assets, they do have debt on their book. I want to make sure with some of the pricing around dairy that it doesn't become as issue for them."
Landcorp entered into a highly ambitious dairy conversion programme as the Government stood on the sidelines sheering the industry's high prices. If it is now in difficulty, the blame can be laid squarely at the Government's feet.
Little said that any sales of Landcorp farms were likely to go into the hands of foreign investors which would see more of the productive economy sending its returns offshore.
"Landcorp entered into a highly ambitious dairy conversion programme as the Government stood on the sidelines sheering the industry's high prices. If it is now in difficulty, the blame can be laid squarely at the Government's feet."
