Pāmu Achieves Another Good Financial Result; Declares Dividend

Landcorp Farming Limited (trading as Pāmu) has reported an EBITDAR (earnings before interest, tax, depreciation, amortisation and revaluations) of $75 million for the year ended 30 June 2022, a 23% increase on the previous year ($61 million). The company has declared a dividend of $5 million.

Chief Executive Mark Leslie said the result reflected good product prices and steady revenue growth across the business.

“The result is particularly pleasing given the significant input cost pressures farmers are facing because of the continuing Covid-19 pandemic, the Russian-Ukraine conflict impacting feed, fuel and fertiliser costs, and general inflationary pressure. As well, farm production and earnings were constrained by extreme weather events, including floods on the West Coast and in the Manawatu, and drought in the Te Anau basin.

“The team managed these external pressures well both on farm and at a corporate level, to produce a very good result.”

Mr Leslie said the rising value of carbon credits along with gains on previously signalled farm sales on the West Coast and in the Wairarapa to Ngāti Kahungunu ki Wairarapa helped offset the impact of significant inflation in farm operating expenses.

“The business is in very good shape, and we have a clear strategy to further enhance the value Pāmu brings to New Zealand.

“This includes ongoing environmental and emissions reduction work across our portfolio. With our first 20 farms now Toitū carbon certified, we will be looking to certify more farms this year and expect all farms to be certified by 2024.

“We are working with partners on a range of opportunities to reduce greenhouse gas emissions and have completed a new calf rearing facility near Taupo, as the first step in our goal to increase the number of calves reared for dairy beef production.”

Mr Leslie says being a clear link between science and technology providers and commercialisation at farm scale is a key role Pāmu can play for the sector and the innovation system.

“Pāmu doesn’t have all the answers but being able to bring ideas to life and test them on our farms across different species and landscapes, will undoubtedly help innovation go faster, which benefits all farmers. As a large entity, with specialist capability and the ability to take more risk than most farmers, we are pleased to play this role. Alongside this we continued to develop our people and are keenly aware that growing good famers is where the future of farming lies in Aotearoa.”

Mr Leslie said the company also saw good progress in its specialty milks business with significant export revenue growth.

“Our deer milk product continues to garner interest globally, with a win at the World Dairy Innovation Awards and export of a deer milk nutritional supplement to Vietnam being two highlights for the year.

“Our equity investments continued their growth trajectory and we invested further in FarmIQ and Spring Sheep during the year, to respectively support digitisation of farming and provide another land-use option in districts facing environmental and farm size constraints.

“As we manage through the current wet winter and early spring, the need for climate change adaption is now very real in our business. A key focus for our farm teams and management is to proactively manage Pāmu’s future resilience. This will be a priority, along with managing geopolitical and inflationary uncertainty, in the year ahead. Successfully navigating through these challenges will ensure ongoing returns for our shareholder and the capacity to invest in on-farm innovation,” Mr Leslie said.

Pāmu recorded net profit after tax of $59 million for the year ended 30 June 2022, double the comparable result for 2020/21 ($29 million). This lift reflected an $18 million book value gain from the reversal of historical revaluation losses on Pāmu land and buildings and a $20 million fair value gain on biological assets.

Other key aspects of the result included:

• Total revenue was $287 million, up 13.9% from the 2020/21 ($252 million) due largely to increases in revenue from Pāmu’s livestock and dairy businesses and increased sales by Pāmu Foods.
• Livestock revenues benefitted from higher product prices across the board. Overall revenue rose 13.4% to $127 million ($112 million in the previous year) with the biggest gain in sheep.
• Revenue from Pāmu Foods increased by $13 million compared to 2020/21.
• Livestock processing capacity limitations due to the impact of Covid-19 and shipping constraints saw the company finish fewer sheep and cattle during 2021/22, with more sales into stores markets than would usually be optimal for the company, which impacted the overall livestock revenue result.
• Milk revenue rose 4% to $120 million in 2021/22 ($115 million). This gain reflected the ongoing strength of global milk prices through most of the latest year, Pāmu receiving a weighted average of $9.48 per kg of milk solids (kgMS).
• Wool revenue was unchanged at $3 million, as was revenue from forestry harvesting at $2 million.
• Pāmu continued to earn carbon credit allocations based on long-term growth from integrating plantation forests into farming operations. The company had 12,368 hectares in plantation as at 30 June 2022 (12,190 hectares at June 2021). New credits worth $11 million were allocated during 2021/22 and Pāmu also gained $2 million from the sale of credits as their market value surged. Revenue from all carbon credit activities was $13 million, up from $8 million in the previous year.
• Total operating expenses rose 17.6% to $220 million ($187 million in the previous year) as higher input costs pushed up Pāmu’s farm working and maintenance expenses by 16.7%. The latter reflected sharply higher prices for fertiliser, fuel and other inputs during 2021/22.
• The company’s spending on pasture maintenance and on cropping and feed costs was up 20.3% to $71 million (from $59 million in the previous year), despite tight control of budgets. Maintaining animal condition and welfare remained a high priority on all farms especially during the periods of drought and flooding that many of our farms experienced.

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