June 29, 2011

NZ Farming Systems to return to profit

NZ Farming Systems Uruguay, the South American dairy farm manager, may resume profit earlier than prediction on higher-than-expected milk prices.

The company, which is facing a full takeover bid from majority owner Olam International, expects to post a net profit of US$2.9 million in the 2012 financial year, it said in a statement.

Farming Systems previously flagged a loss of US$1.9 million. Earnings before interest tax are forecast at US$8.9 million, up from US$3.3 million.

Farming Systems' draft forecasts have improved earnings primary as a result of a higher than assumed average milk price of US$0.37/litre, the company said in a statement.

The budget, which has yet to be formally approved, will be considered at a board meeting, the company said.

Earlier this week, parent Olam said it will not lift its 70c-a-share bid to minority shareholders to take full control of the company, though the higher than expected milk prices mean its offer might not be as compelling.

In May, Grant Samuel's independent report said the bid had merit, but was reliant on Olam's forecast.

Earlier this month, a group of minority shareholders said the offer was too low, and claimed it had enough support to block compulsory acquisition, which kicks in if Olam gets to 90%.