Landcorp - Crown Ownership Monitoring Unit

The 450-hectare Blairs development opened in June 2010as the fifth farm in Landcorp’s Weka dairy complex,near Greymouth on the West Coast.The past year has not been easy but Landcorp can reportcreditable financial results for the period and progress ona range of other indicators. Looking ahead, we are in astrong position to continue working for New Zealand andto pursue our goal of being the world’s best agribusiness.Financial ResultsLandcorp made a net operating profit beforetax of $10.0 million for the year ended 30June 2010, compared with $6.9 million for2008/09. The result is a creditable reflection ofthe company’s long-term strategy and of tightexpenditure control, all in the face of volatileproduct pricing, high exchange rates and thegeneral cost pressures on farming. In additionto this result, Landcorp made a pre-tax profitof $8.7 million on farm sales.The value of Landcorp-owned farms decreased$120.5 million between July 2009 and June2010, this becoming the main contributorto a $112.5 million loss in the company’sshareholder value for the year (2008/09: $76.0million loss). The loss is, of course, unrealisedand must be seen in context of substantialshareholder value gains over the long term.Financial results are discussed further onpages 42, 43.DividendsLandcorp will pay the shareholders dividendsof $18.0 million for 2009/10 (2008/09:$10.0 million). Of the total, $9.0 millionwill be special dividend funded from farmsale proceeds. Under our Protected LandAgreement with the Crown (September2007), $17.4 million of the dividend total willbe diverted back to Landcorp in the form ofredeemable preference shares. The balance($0.6 million) will be paid in cash. The 2010/11year will be the final one in the four-yeardividend diversion scheme through which thecompany receives the balance outstandingon its sale to the Crown of nine propertiesset aside for public policy purposes under the2007 agreement.StrategyLandcorp will continue with the strategicdirection established in 2001: Diversificationacross dairy, deer, sheep and beef farming,clustered management of properties andongoing improvements in productivity. We willcontinue all these with strong emphasis onenvironmental protection and sustainability.Increasingly, Landcorp makes use of newtechnologies and information to be moreproductive, profitable and sustainable. Thisannual report is entitled “Informed Farming” tohighlight the importance of data gathering andanalysis, and of well-informed decision makingin every aspect of Landcorp business. Keydecisions are being made regularly, on-farmand in Wellington, about animal management,breeding, pasture growth and land use. Thereare also big decisions on product marketing,property investment and more. Overall, theinformed farming approach is critical to howwell Landcorp works for New Zealand.Our strategy includes constant readiness tolook at farm acquisition prospects when thesearise. Decisions must, of course, be informedby analysis of relevant data and standardcommercial disciplines. This was certainly ourapproach in June and July 2010 when Landcorpbid for the purchase of 16 farms previouslyowned by the Crafar family. The bid price,while not accepted by receivers, reflected ourcommercial valuation of the properties. Asa large-scale agribusiness, we took a wellinformedand responsible view of the Crafarfarm offering – and will do the same as otherinvestment opportunities arise for Landcorp.SustainabilityAs noted, we place high importance onsustainability, in environmental, social andeconomic terms. The Balanced Scorecard(pages 16–22) reports on indicators ofprogress in each area. Our sustainabilityobjectives include minimising Landcorp's5