Landcorp - Crown Ownership Monitoring Unit

LANDCORP FARMING LIMITED AND SUBSIDIARIESCAPITAL STRUCTUREDollars in millions unless otherwise stated 2009/10 2008/09Total assets 1,521.9 1,668.7Total debt 149.4 181.8Shareholders’ funds 1 1,337.6 1,450.1Shareholders’ funds 1 as % of total assets 87.9% 86.9%1Includes redeemable preference sharessubdivision at Te Anau is under consideration.The outlook includes a subdued 2010/11, butthe company has protected sale values to theextent possible and is well positioned for risingdemand when this occurs.Landcorp Developments Limited /Landcorp Pastoral LimitedThese two subsidiaries were establishedto support the Wairakei forest-to-pasturedevelopment which was stopped in December2007 after Parliament passed climatechange and emissions trading legislation.The implications for further conversion inland use away from forestry created muchcommercial uncertainty for all parties involved.Six dairy farms and one dry stock propertywere developed by December 2007 and theseare currently being farmed. The remainderof this central North Island venture remainsunder review, and the activities of LandcorpDevelopments and Landcorp Pastoral weretransferred to the parent, Landcorp Farming,in July 2010.Landcorp Holdings LimitedLandcorp Holdings was established during2007/08 to hold properties under Landcorp’sProtected Land Agreement with the Crown.The agreement also placed a moratoriumon commercial sales of most other farmlandowned by Landcorp until September 2011(with the sale of Sweetwater, Te Karae andTe Raite Stations covered by a recent waiver).During 2009/10, another property subjectto the moratorium (Rangiputa) was alsoidentified for potential inclusion in a Treaty ofWaitangi settlement.StrategyOverall, Landcorp retains a strong strategicfocus on productivity growth through bestpractice farming, and through the astute useof technologies and information for moreefficient and sustainable production. In dairy,beef and deer operations, we are embracingthe benefits of electronic identificationfor more regular and more reliable datagathering and hence, better animal and herdmanagement. The approach is taken furtherin dairying with our roll-out of MilkHub –an excellent example of how purpose-builttechnology and valuable information flowsdrive productivity growth.Landcorp sheep breeding programmes areanother example of how collection andanalysis of data make a vital contribution toproductivity gain through genetic progress.In 2010, we are poised to go further andfaster with the advent of genomic breedingvalues that refine ram and ewe selections. Ofcourse, our strategic approach to productivityalso encompasses pasture management andfarm development. Landcorp is, for example,leading the effort to control manuka beetleand limit its costly damage to West Coastpastures. More generally, we are extendingfarm development practices to includewell-informed decisions on environmentalsustainability as well as productivity. OnMararoa Station, Southland, and elsewherethese go hand-in-hand.Landcorp strategy is to maintain diversifiedfarming operations across sheep, beef, dairyingand deer. This approach has served us well incontext of high volatility in product prices andregional climate variation. During 2009/10,the recovery in dairying has offset a cyclicaldown-swing in sheepmeat and venison,with beef also down for much of the year.We will continue strengthening dairying anddeer operations as part of the long-termdiversification into these areas, alongsidesheep and beef.In dairying, Landcorp has now completed the450-hectare Blairs development on the Wekacomplex, near Greymouth. The fifth dairy uniton Weka, Blairs has a state-of-the-art dairyshed and will be milking around 850 cows inthe current season. Weka is on track to becomea self-sufficient complex with a 5,000-cowherd by spring 2011.In deer, Landcorp will develop existingoperations with plans to bring a further 800hectares across to this species in 2010/11 andto finish more animals on properties also usedfor breeding with gains expected in production.We account for around 12 per cent ofnational deer production, and are committedto farming through periods of lower marketpricing on venison and velvet.Overall, Landcorp is a strong supporter oftransformation in New Zealand’s red meatindustry to unlock greater value for farmersand processors through systematic linkage ofproduction to consumer tastes and marketrequirements. The company is now a partnerwith Silver Fern Farms, PGG Wrightson and theGovernment in a bold seven-year programmefor such transformation through an integratedvalue chain approach to international markets.It will focus on improving genetics, on-farmperformance and meat processing, and alsoon market analysis, information flows andtechnology development.Market linkage is a key area of Landcorpstrategy. We will continue to work withindividual meat companies to develop nicheopportunities in international markets and toalign production more closely with marketrequirements. In this context, we applaudmeat processors' introduction of yield qualitycontracts with premium prices for supply of11