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Pengxin's Milk NZ posts 37% slump in 2016

NZ Newswire logoNZ Newswire 9/01/2017 Paul McBeth

Shanghai Pengxin's Milk New Zealand Holdings unit widened its annual loss in 2016 as revenue sank by more than a third on a lower global milk price and the company's sharemilking agreement with state-owned enterprise Landcorp.

The Auckland-based farm owner posted a loss of $10.9 million in the 12 months ended June 30, widening from $9.4m a year earlier, financial statements lodged with the Companies Office show. Revenue dropped 38 per cent to $10.7m, of which milk sales slumped 40 per cent to $9m. At the same time, Milk NZ's cost of sales rose 27 per cent to $11.8m, registering a gross loss of $1m in the year.

Pengxin's New Zealand operations also went through a restructure in the 2015 year, with various farm assets previously bundled into Milk NZ shunted out into related parties. Those discontinued operations contributed revenue of $3.4m in the year-earlier period, and a loss of $1.7m to the 2015 bottom line.

"The milk price of $3.90 per kg milk solid and the 50/50 sharemilking model contributed to the low revenue for Milk NZ Holding for the year ended 30 June 2016," chief financial officer Tony Nie said.

Global milk prices slumped through 2015 and into 2016 as an oversupply of dairy products coincided with a reduction in Chinese demand.

The Chinese-owned company's five-year sharemilking contract with Landcorp will conclude in May this year, ending a relationship that started when Pengxin bought the 16 Crafar family farms out of receivership in 2012, a deal opposed by local buyers offering less who took their case to the Supreme Court.

In 2015, Pengxin's plans to buy the Lochinver farm near Taupo was rejected by the government against an Overseas Investment Office recommendation, and Pengxin later ditched plans to buy other farms in Taupo and Northland.

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