Chair Jim Sutton claims Landcorp's latest result is a good return to the Government , but really how good is it ?
This result is a big improvement on last year’s $10m pre-tax profit.
The state-owned enterprise reported a $42.2 million net operating profit before tax for the year ended June 30.
The corporate farmer says this profit improvement is due to higher meat, dairy and wool prices and favourable growing conditions through the second half of the year. The dividend is also a big increase on the previous year’s $18m.
The profit came from $94.6 million, made from a record production of 12.5m kilograms of milksolids and another $51.3m from sheepmeat. Its average lamb price rose 40 per cent– as the export lamb market made a strong recovery.
Meanwhile, beef earnings were up 28 per cent to $40.1m, along with wool, venison and forestry. The company also made an extra $10.3m on land sales.
Landcorp chairman and former agriculture minister Jim Sutton said it was gratifying that the state farmer could make such an increased cash contribution to New Zealand after the Christchurch earthquakes.
“Our commitment in 2011-12 and beyond is to keep delivering in financial terms and in response to other big economic and environmental challenges facing this nation,” he said.
But is Landcorp really delivering all that greater return to taxpayers and the Government?
The state-owned organisation currently owns 175,000ha of farmland, valued $1.05b and livestock worth some $297m. It has a total asset base of $1.66 billion.
Even with my rudimentary maths skills, I can see that a $42 m profit and a $27 m dividend is not all that of a wonderful return on capital base – in fact is pretty awful!
So is Landcorp really that good of an investment for the Government and taxpayers?
While I know it is almost now considered sacrilege to talk about state asset sales and even a more treasoness offence to consider selling farmland to foreigners – especially those of Chinese extraction.
But should we not at least discuss it? When the Government is running massive deficits and struggling to pay for essentials such as healthcare and educations – let alone the rebuild of Christchurch as Jim Sutton points out – can New Zealand afford to sit on a near $1.7 billion of assets with such a poor rate of return?