Fully paid-up dairy farmers who are shareholders of LIC and users of its services will benefit from a near 50% increase in the annual dividend after the co-operative reported a 16.5% rise in net profit after tax.
The 2022 financial year results included an increase in dividend to 18.43c a share, accounting for $26.2 million distribution, including 80% of underlying earnings.
The latest dividend announcement represents 18.5% gross return on the current share price of $1.39, a yield that would be hard to beat anywhere in the New Zealand share market.
A special dividend of 10c fully imputed was paid on January 21 to partially distribute funds from the divestment of the automation division last June.
Therefore, shareholders have received a gross return from the FY22 year of about 28% from the farmer-owned co-op or 20% fully imputed.
About $4m of the latest dividend amount is expected to be applied on repaying nil-paid shares dating back to 2018, when they were issued to shareholders as part of a share simplification process.
Chair Murray King said the FY22 increase of 5.7% in revenue to $263m and 16.5% increase in net profit after tax to $26.7m was a record result.
It was driven by increased farmer spend on premium genetics and herd improvement services to breed more efficient cows with a lighter environmental footprint.
Difficulties encountered during the year included covid-19, inflationary pressures and supply challenges. LIC thanked farmers for their support, many of whom faced similar challenges.
“Delivering value for our farmers is at the centre of everything we do and it’s results like this that enable us to do just that – through our herd improvement products and services, a solid dividend, and, importantly, the right R&D investment to keep their herds profitable and sustainable into the future.”
Farmers’ use of fresh semen from premium bull teams has increased genetic gain, and long-term users of LIC genetics have almost doubled the speed of improvement in their herds over the past decade.
King said the co-op has invested heavily into genomics over the past 30 years and new research has confirmed farmers are reaping the rewards of this now.
“We don’t need to milk more cows, we just need to milk the best cows and we’re really pleased that our farmers are making solid progress in this space.”
LIC put $18.2m into research and development during the year, representing 6.9% of revenue.
A large portion was directed at the large-scale methane trial, with CRV and funding support from the Agricultural Greenhouse Gas Research Centre, which is aimed at discovering a genetic link for methane production to ultimately enable farmers to breed cows that emit less methane.
King said the trial has been measuring feed intake and methane emissions from 300 young bulls and results from this phase are expected to be released later this year.
The outlook for trading this financial year is good with underlying earnings in the range of $20m to $26m, assuming no major adverse climate event or milk price change.