New Zealand's biggest farmer, state-owned enterprise Landcorp has announced a $10 million reduction in its forecast earnings for the 2019 financial year.
A notice on Treasury's website says Landcorp now expects full-year earnings before interest, tax, depreciation and revaluations (EBITDAR) of between $27m and $32m, compared to the previous forecast range of between $37m-$42m for the year ending June 30.
The dairy and red meat farming company attributed the forecast fall to a string of lower than expected returns from its various businesses.
The reasons included extremely dry conditions lowering milk production in the final months of the season, particularly on Landcorp's central North Island farms which produce about 40 per cent of its total milk production.
A reduction in forecast milk price from Westland Milk Products from $6-$6.20/kg milksolids to $5.80-$6 and uncertainty over the level of a dividend from Fonterra were also cited, along with lower than forecast dairy beef prices.
Landcorp also blamed a greater percentage of lower priced bulk sales of milk powder inventory for lowering overall margins and lower profitability for Focus Genetics Australia as a result of drought.
The company said these issues were partially offset by reducing discretionary expenditure while ensuring the business was well positioned for the next season.
The new, reduced forecast assumed there would be no further material adverse weather events, a significant strengthening of the New Zealand dollar or other material changes to market prices, the notice to Treasury said.
Landcorp, which operates 122 farms covering 376,000 hectares, for the 2018 financial year posted EBITDAR of $48.5m, compared to $35.6m the previous year.
However net profit after tax for 2018 was down on the previous year at $34.2m, against $51.9m in the 2017 year.
Landcorp's brand name is Pamu. It produces milk, including sheep milk, beef, lamb, vension, wool and wood.
Landcorp chairman Dr Warren Parker has been approached for comment.