Farmlands criticised after $9m loss

Farmlands chief executive Peter Reidie.

Loss-making rural supplies co-operative Farmlands appears to have "lost its way", North Otago farmer Chris Dennison says.

Yesterday, Farmlands announced a $9million loss for the 2015-16 year, having advised shareholders in April it would not be returning a bonus rebate this year because conditions would not allow it.

The loss compared with an operating profit of $11million last year, while revenue was $2.1billion, down slightly from $2.2billion.

Mr Dennison, who is seeking a position on the Farmlands board in the South Island director elections, was critical of the co-operative's performance.

"Throughout the year, Farmlands has made reference to the poor performance of the rural economy affecting [its] profitability.

"Yet Farmlands is operating in the same market as PGG Wrightson and Ravensdown Fertiliser, both performing well," he said.

Farmlands' scale of operation and a shareholder base of 60,000 should give it a substantial advantage over its competitors but it had not leveraged that position to gain prominence in the market, he said.

"Agriculture operates in a volatile market environment and any rural business either needs to be agile enough to adapt to seasonal variances or have built-in resilience to allow it to weather economic storms.

"When farmers are having a tough time on the land, they do not want their incomes reduced by poor co-operative performance as well."

Farmlands needed to "face up to the reality" that the merger (between South Island-based CRT and North Island-based Farmlands) in March 2013 had not gone well, he said.

"It's time to take a microscope to the way it operates and make the necessary changes to restore profitability. The time for excuses is over."

Farmlands chief executive Peter Reidie described the result as "disappointing" but said shareholders had been well prepared for it.

"Our shareholders understand that when the going gets tough on the farm, as it has this year, particularly on the dairy side, we're not immune.

"But they also want reassurance that we are driving hard to restore Farmlands to profitability. We've moved to adjust quickly to sharp market downturns in some sectors and we are already measuring stronger performance in the new financial year on the back of the steps we're taking," he said.

The nutrition and retail businesses were especially hard hit by the downturn, and the co-operative was also carrying the associated cost of change.

"The benefits of the merger, which has given us a true national footprint, are if anything even more compelling three years down the track.

"But there is a price to pay in investment so we can deliver the maximum benefit for our shareholders longer term. It's very much a case of investing upfront to secure a stronger tomorrow."

Chairman Lachie Johnstone said Farmlands was on track for a recovery in 2017, on the basis of what it was experiencing in the first three months of the new financial year.

Voting in the South Island ward director election closes at 5pm on October 25.

Mr Dennison is standing against fellow North Otago farmer John Foley, who has been a director of CRT and then Farmlands for the past 15 years.