NZ Farming Systems Outlook Improves on Milk Prices

NEW ZEALAND - NZ Farming Systems Uruguay Ltd., the South American dairy farm developer, trimmed its forecast annual loss amid rapid gains in dairy prices and said chairman Keith Smith will step down in favour of an independent director.
calendar icon 17 December 2009
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NZ Farming Systems Uruguay advises that an increase in milk prices received by the company has improved its outlook for the current financial year.

The milk price received by the company in November was 27c per litre, up from 24c in October. Analyst consensus for the 2009/10 financial year is for an EBIT (earnings before interest and tax) loss of $US10-15 million, based on a milk price of US 20c per litre. Due to the improving dairy prices, NZFSU now expects its EBIT loss at this early stage of development to be no more than $US 10 million.

As noted in the company’s recent investor newsletter, there is some potential for further upside in milk prices received by NZFSU, and the summer climate in Uruguay is currently more favourable than it was at the same stage of last year; however, these positive factors need to be balanced against the fact that the financial year is at an early stage.

In a seperate statement, the company annouced that Keith Smith has stepped down as chairman f the company to make clear the separation between Farming Systems and 11.5 per cent shareholder PGG Wrightson. Independent director John Parker will take Mr Smith’s place, however he will remain on the board.

“The boards of both companies have routinely excluded individual directors from discussion of any matters on which they might be conflicted, and I believe it is desirable for the separation of interests to also be reflected in the leadership of the two boards,” Mr Smith said in a statement. “While I have decided to stand down as chairman, I look forward to continuing as a director and making a further contribution to the company’s development in that capacity.”

The shares climbed 4.3 per cent to 49 cents on the NZX earlier this week and have slumped 20 per cent this year.

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