Landcorp profits plunge 84pc

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.

State-owned farmer Landcorp said its net profit fell by 84 per cent to $4.9 million in the year to June 30, due mostly due to lower milk and lamb prices, but the company said the result would have been worse had it not secured a guaranteed milk price from Fonterra.

Revenue dropped by 12 per cent to $213.5 million.

Landcorp said the sharp decline in the price of milk solids, combined with lower lamb prices, saw income from farm products drop by 11.7 per cent on the previous year to $213.5 million.

Prime Minister John Key and Finance Minister Bill English have said the government is in talks with Landcorp over its debt levels, which have increased as the company undertakes a dairy conversion of the 26,000 hectare Wairakei Estate north of Taupo, for private owners.

Chief executive Steven Carden said record-low dairy prices and tough growing conditions had driven the overall financial performance down.

However, a "constructive response" to challenging conditions had helped buffer Landcorp from major impact. "It's been tough for Landcorp and the entire dairy sector, so our result is solid in that context," he said.

"Things might have proved even more challenging had we not secured a significant volume of supply to Fonterra under their Guaranteed Milk Price scheme at prices that were above the final payout level," he said in a statement.

Carden said the company had a conservative balance sheet, with low levels of debt relative to its assets."We're very comfortable with our level of debt," Carden said.

"It has moderately increased over the past few years to fund dairy conversions on the Central Plateau and complete conversions in Canterbury, based on long-term views of dairy payout levels."

Landcorp didn't say if it is paying a dividend to the government.

- additional reporting BusinessDesk