Rising world milk prices mean newly listed PGG Wrightson offshoot NZ Farming Systems Uruguay (NZFSU) expects to beat forecasts of annual profit of $US1 million ($NZ1.27 million).
NZFSU, which listed in December 2007, forecast annual net profit from operations of about $US1.5 million, including a performance fee payable to PGG Wrightson. The previous forecast excluded the performance fee.
Milk prices received in Uruguay were 25% higher than in December - equivalent to $NZ7.35/kg of milk solids - and the market continued to favour producers, NZFSU chairman Keith Smith said.
That price compared with Fonterra's recently increased payout for the 2007-2008 season to a record $7.30/kg of milk solids.
At listing, NZFSU had expected the equivalent of $NZ5.10/kg of milk solids for 2008-09, or US26c/litre. The price was seen settling at about US30c/litre, Mr Smith said.
‘‘The increased milk price and the company's accelerated development programme have outweighed the revenue impact of poor winter and spring weather on production per cow.
‘‘The higher revenue will be offset to an extent by increased costs, including animal feed.''
A weak United States dollar and limited supply meant milk prices were likely to remain near record levels in the next 18 months.
The company's milk production and farm development programme were in line with prospectus forecasts, with 10 cowsheds to be in operation by the end of April, milking 4300 cows.
NZFSU planned to be milking on average 13,000 cows through 20 cowsheds, on 12,000ha, in 2008-09. Milk production would rise up to five times, to about 5 million kg of milk solids.
Peak operation would be reached by 2010-11.
NZFSU, which is converting land in Uruguay to intensive New Zealand-style dairy farms, posted a first-half net loss of $US6.8 million as expected due to the performance fee payable to PGG Wrightson.
Shares in NZFSU were up a cent at $1.40. - NZPA
