The appraisal into NZ Farming Systems Uruguay by Grant Samuel makes shocking reading, and raises serious issues with the leadership and management teams of PGGW that handled the contract.
No finacier would allow a farmer with a new development to ignore the business plan, over purchase farm land, then decide to irrigate, and fail to allow enough money for fertiliser.
So how has NZ's biggest farm service provider been allowed to do this at a huge cost to shareholders funds in NZSFU? Where is the accountabilty for this performance?
This company has just been given public money in the Primary Growth Partnership; can we trust them to follow the business plan this time around. Farmers should be watching closely.
PGG Wrightson, the founder of New Zealand Farming Systems Uruguay, received $31 million in fees from its offshoot in the past four years, the Grant Samuel appraisal report shows.
PGGW received $22.8m in performance fees and $8.2m in management fees from 2007 to 2010 the appraisal shows, and in the two years to June 2009 supplied US$28.7m (NZ$40.8m) of equipment, supplies and real estate services. This week it struck a deal in which NZFSU will pay it $4m to buy it out of the management contract reports Stuff.
The appraisal reports show NZFSU, managed by PGGW, went on a land-buying spree rather than sticking to the prospectus plan. As a result NZFSU ran out of cash and could not develop the farms to the level set out in the prospectus and has fallen way short of production targets. One of the key reasons was that it did not have the cash available for fertiliser, the report says.
Chairman John Parker admitted this week in a briefing around its annual result that the company was only at "crawling" stage in developing the dairy farms. The Grant Samuel appraisal says that in the 2006 prospectus NZFSU said it planned to buy 7000 hectares by June 2007 with a capital cost of US$60m. By June 2008 it had bought a total of 36,300ha, compared with a prospectus target of 13,000ha. Some land has since been sold to fund development and pay debts and land holdings are now around 28,600ha.
The completion of farm developments still requires US$62.6m. It did not plan to develop irrigation on the farms but it now intends to irrigate half the 20,000ha it wants to convert to dairying. That adds US$35m to the development bill, the report says Grant Samuel said NZFSU had not produced positive cashflow and was unlikely to for several years. It also cast doubt on the targets set in NZFSU's five year business plan.
3 Comments
The other day there was a flurry of comments about "zenophobia and racism" when some questioned the wisdom of having our farmland bought and managed by outside interests. But this is a classic case of The Pot Calling the Kettle Black." I wonder what the resident farmers of Uruguay are saying about us.
Nothing in today's economy speaks to the need for jobs and sustainable growth. Everything is about generating fees and commissions. Whether you are a Goldman Sachs banker helping the Greek government structure debt so that it vanishes into the ether of swaps and CDO's, or a New Zealand oligarch washing investment capital through a shell company offshore - it beggars the ability of anyone to trust anything anymore. Values have been replaced by naked profit and greed.
I have nothing against the Chinese people, they make ideal citizens. They generally vote conservative (or for the Party that let them in) and keep to themselves. Of deeper concern is where their money comes from, and at whose expense. I'm sure a comment like this has many an entrepreneur blowing coffee through their nostrils, but there it is.
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