apr-11.pdf (2.07 MB) - Crown Ownership Monitoring Unit

OperationsLandcorp’s performance is significantly impacted by two factors: climaticconditions and commodity prices. This is highlighted by the spring storms in2010/11 having a significant impact on lamb and calf numbers. In 2009/10, asevere drought in the upper North Island resulted in sales of capital livestockand dairy cows being moved to farms in other parts of New Zealand. Suchevents have a flow-on effect to subsequent periods.Landcorp’s strategy to mitigate the volatility of climatic and product prices isto maintain diversified farming operations across sheep, beef, dairy and deer.Landcorp also focuses on achieving productivity growth through best practicefarming, including the use of technologies and information. Landcorp’s strongfinancial performance in 2010/11 benefited from its diversified revenue base.Financial performanceLandcorp achieved a very good net operating profit of $42 million in 2010/11(net operating profit excludes the effect of the revaluation of livestock and farmprices), which was significantly up on the previous year’s net operating profitof $10 million. Landcorp benefited from higher dairying payouts through milkprices recovering and its milk production expanding (milk solids productionwas 12.2% higher than the five-year 2007 to 2011 average).Landcorp’s TSR was 10.3%, owing to an increase in stock values. Thisfollowed a loss of 12.4% in 2009/10 owing to unrealised losses on farmvalues. This measure is highly dependent on land and livestock values andis therefore inherently volatile. The majority of Landcorp’s TSR is unrealisedvalue gain from its large asset base, whereas its dividend yield averaged 0.8%over the past five years.Performance against planLandcorp’s TSR was a gain of 10.3%, well above the target of 5.8% and is aresult of large gains in the value of livestock. This follows the 12.4% loss in2009/10 which was a result of large losses on land values. Landcorp’s netoperating profit was also well above target owing to strong growth in revenuefrom dairying and livestock operations.Major investmentsLandcorp continues to invest inits farms, particularly throughexpansion of its deer and dairyoperations as well as in irrigationand stock water infrastructure.Non-financial performanceLandcorp completes a BalancedScorecard report to measureits success in achieving itssustainability objectives suchas sustainable improvement ofpasture, and stock; farming withenvironmentally sound practices;and protecting environmentalareas. Landcorp performed wellagainst its operational non-financialperformance measures. Resultsbelow target were largely owing toclimate impacts.Corporate social responsibilityLandcorp has targets for itsperformance in relation tothe environment, staff and itscustomers. These are included inthe Balanced Scorecard.DividendsLandcorp’s target dividend payout is to average 75% of net operating profitafter tax. For 2010/11, Landcorp has declared a record dividend fromoperating profit of $27.5 million, which is a pleasing result. This is the firstfull-year cash dividend to be received by the Crown since the Crown andLandcorp entered into the Protected Land Agreement in 2007. Since thendividends have been used to settle the unpaid portion of the land acquisition,which has now been fully paid.page | 79