Landcorp Farming Limited advises that it has updated its forecast Earnings before Interest, Tax, Depreciation and Revaluations (EBITDAR) for the financial year ending 30 June 2022. It now expects full year EBITDAR of between $72 million and $77 million. This compares to the previous forecast of between $83 million and $88 million, issued 21st February 2022 and prior year EBITDAR of $61m.
The change to expected EBITDAR largely reflects a reduction in forecast income from both dairy and livestock. The forecast milk price has fallen from $9.60 per kilogramme of milk solids (kgMS) in February to $9.30/kgMS, resulting in a $3.9m reduction in revenue, while lower than expected milk production (mainly due to lower pasture production) has reduced the forecast by an additional $0.6m. Livestock revenue is anticipated to be $4.9m lower due to a combination of lower sales revenue (due to poor pasture growth in Southland/Te Anau) and sale of stock store versus finished due to delays in processing space as a result of COVID. The company has also experienced higher than expected livestock losses due to storms, particularly on the East Coast.
In addition to lower revenue, farm working expenses have continued to increase due to interrupted supply chains and the Russia-Ukraine war. Examples of this are the challenge to procure replacement farm vehicles and the resulting increase in maintenance costs of the older vehicles retained and additional fertiliser costs which were $4.8m more than budget.
These impacts have been partially offset by reduced personnel costs ($2.3m) and increased gains made on land sales ($3.2m).
Despite these challenges forecast EBITDAR remains significantly higher than that of the prior year ($61m) and ahead of the budget of $73.2m
This forecast assumes there will be no material changes due to the year-end audit which is currently in progress. The final 30 June 2022 results will be released towards the end of August