By Philippa Stevenson
agricultural editor
Farm milk production, down by almost 8 per cent, has flowed through into a reduced end-of-year result for the country's largest dairy company.
In the Hamilton-based company's annual report, new chief executive Graeme Milne urged shareholders to look beyond the difficult season with its reduced milk flows and
international prices which slumped to a 10-year low.
He said that as a result of a 7.9 per cent drop in milk supply in the 1998-99 season, revenue had reduced to $2451 million, compared with $2576 million in the previous year.
The year's payout to farmers of $3.63 per kilogram of milksolids was a creditable result in the circumstances but was "not adequate to arrest the continual decline in real commodity prices, which has impacted on shareholder returns over recent decades, and will continue to occur," he said.
Borrowings were up from $260 million to $347 million as the company bought the remaining 50 per cent share in Anchor Ethanol, and other assets at its manufacturing sites, which had been held by the Dairy Board.
The debt figure was also boosted by other investment in plant including the $165 million expansion at the show-piece Te Rapa site on the northern outskirts of Hamilton which will take its capacity to 8 million litres of milk a day.
In a deal which contributed to a reduction in the company's equity to assets ratio from 58.6 per cent to 53.1 per cent, the company sold its interest in Sachet Packaging and Dairy Packers to the Dairy Board. The company has assets of $1,649 million.
The performance of the company's local milk market subsidiary, New Zealand Dairy Foods, nominated for sale in the industry's plan to move to a mega co-op incorporating up to eight other dairy companies and the Dairy Board, is likely to attract keen shareholder interest.
Dairy Foods revenue was down by around $10 million on the previous year to $377 million, which the company said was due to a flat sales volume and a change in trading terms.
Competitiveness would be reinforced by "significant information technology investments coupled with a planned $17 million upgrade of the Takanini milk processing plant which would become the division's only processing site. A plant at Mount Maunganui would be closed.
