NZ Farming Systems seeks $110m

Vivek Verma. Photo / Steven McNicholl

NZ Farming Systems Uruguay will need to raise up to US$110 million ($145m) to fund a business plan aimed at making the company profitable in two years, says chairman Vivek Verma.

The business plan for the company, set up to develop dairy farms in Uruguay, was reviewed after Singapore-listed Olam International last August raised its stake to 78 per cent after a successful takeover bid.

"The biggest change that has been implemented has been the feed regime," Verma said.

The area under dairying would be 20 per cent smaller than previously planned at about 16,000 hectares, with concentrate feeds accounting for about 35 per cent of diets compared to an earlier 10 per cent.

Milk production was expected to rise rapidly from 100 million litres forecast this year to close to 300 million litres, with an increase to a milking herd of about 48,000 cows.

The total capital requirement of the company had increased from an earlier projection of about US$60 million to more than US$100 million.

The company expected to raise up to US$110 million of capital within the next six to 12 months to fund capital expenditure and repay an Olam shareholder loan.

"Our plan now anticipates a break even at an [earnings before interest and tax] level in the coming 2011/12 financial year and a positive [net profit after tax] in 2012/13 year," Verma said.

Earnings before interest and tax at a steady state would be about US$25 million.

"This would be about half that of the previous plan but it's considered a stretch target, but achievable by both the management and the board."

NZ Farming Systems this week posted revenue for the six months ended December 31 up 72.3 per cent to US$18.9 million, with a net loss of $6.8 million.

Company shares closed unchanged on 59c last night.