NZ Farming Systems Uruguay half year results:
Revenue - $US8m up 6.8pc
Loss -$US9.8m up 30pc

Key Points:

New Zealand Farming Systems Uruguay has posted an after-tax loss of US$8.917 million ($17.80m) for the six months to December 31.

It said today that it will need more capital by June, and if it cannot borrow the money, it may sell some of its land.

The company - in which big rural servicing company PGG Wrightson has an 11 per cent stake - lost more in that six months than in the same period last year (US$6.808m) and in the full year to June 30 2008 (US$7.956m).

Its earnings before interest and tax (ebit) for the six months were US$9.5m.

NZFSU is facing a shortfall in budgeted cashflows, because of lower milk prices and production.

It has a plan to conserve cash by slowing development. A local funding programme raised US$16m during the first half of the year, but further funding will be required by June.

If sufficient funding is not available, its preferred option will be "selective land sales" to free-up cash to fully complete some of its land development. It has 7300ha of land in milk production, less than the 12,800ha originally planned for June 2009, and the revised projection of 10,200ha for that date.

The NZFSU farms in the provinces of Rio Negro, Florida, Lavalleja and Rocha, in the west, south and southeast of Uruguay run 60,000 cattle, including a milking herd of 11,500. Its original plan for the year to next June was for a total herd of 85,000 and a milking herd of 20,000.

In December, NZFSU warned that a combination of Uruguay's low rainfall and falling world milk prices would push annual ebit) to a full year loss of between US$7 million ($12.3 million) and US$11 million.

The company, which uses its New Zealand dairying expertise on farms in the South American country, had previously forecast an ebit profit of US$8 million to US$10 million for the year ended June.

Directors today said delays in the installation of irrigation, drought "and to some extent, cashflow limitations" had reduced the rate of progress.

The operating loss reported today was due to low milk prices and drought, and the company intended to deal with the prevailing conditions and position for an eventual rebound.

"In the current recessionary environment, it is likely to be at least the third quarter of 2009 before prices start to lift".