State-owned farmer Pāmu hauls itself out of the economic mire and turns a $62m profit

State-owned farmer Pāmu has climbed out of the economic doldrums, thanks mainly to greater volumes and higher prices of agricultural commodities.  

Most of the gain was in the last months of last year.

Pamu is the trading name for the State Owned Enterprise (SOE) Landcorp Farming Ltd, and works 110 farms covering 360,000 hectares on behalf of the Crown.  It was previously so unprofitable, that the Act Party called for its privatisation to get the public “off the hook”.

But in the six months to December 31, Pamu made net profit after tax  of $62 million. This compared with a loss of $8 million in the corresponding six months of 202,3 and a loss of $26 million in the 12 months to last June.     

“Our continued focus on performance, alongside reducing overhead costs, a gain in livestock volume and valuations, and stronger-than-expected market prices for dairy, beef, and lamb, contributed to this positive result,” says the company’s chief executive, Mark Leslie.

Leslie points to another profit measure, net operating profit, which smooths over extraordinary items, and says that should deliver a full-year positive of $43 million to $51 million, up from last November’s forecast of $25 million to $40 million. 

He adds the company has striven to boost productivity by focusing on core farming principles such as managing soil and animal health, maintaining optimum pasture utilisation, and following best-practice management.  

The organisation has also worked to reduce costs. But much of the gain came from improved output. This includes a 2% increase in volumes of milk solids, heavier carcass weights and improved cow fertility, which produced higher numbers of dairy calves reared for the meat industry rather than being disposed of as bobby calves. There were also higher than expected final prices for meat per kilo. 

Analysts are generally reluctant to dive too deeply into Pamu’s profitability, especially based on half-year results, because of variable factors such as the weather. In addition, as an SOE it is of little interest to share market analysts.   The company’s board and management, meanwhile, stress their company must be profitable but serve other roles as well

“The New Zealand Government benefits from its investment in Pāmu through equity growth, dividends and industry benefits such as genetic development, R&D partnerships and industry leadership,” they say in their report.

An example of this is Pamu’s drive towards an ultimate goal of 100% retention of bobby calves for the so-called dairy beef market, which added $2 million to the company’s costs for the six months.

Similar remarks were made at the time of the Act Party’s privatisation call, when observers stressed Pamu’s other goals such as helping young people to get into farming. It was also made clear that a lot of Pamu’s property had been made available to Iwi under a Right of First Refusal (RFR), which is an extension of the treaty settlement programme. This situation would persist even if an RFR had not been acted on by iwi for financial or other reasons.  Analysts concluded at the time that these and other factors would make the Act privatisation call unrealistic.