New Zealand dairy farmers have a global edge in milk productivity and profitability, but the industry needs to remain ambitious about keeping ahead of the best in the world.
That was the message delivered by Livestock Improvement Corporation Limited (LIC) board chairman Murray King at the farmer-owned co-operative’s annual meeting in Invercargill on Wednesday. It was the first time the farmer owned co-operative held it’s meeting in Southland, attended by farmers, LIC directors, shareholder councillors and staff.
LIC is the largest artificial breeding company in New Zealand, with about three out of four cows grazing on dairy farms sired by an LIC bull.
King said the dairy industry was vulnerable to the same disruption that other industries had experienced from new technology and innovation.
“There are also clear disruptive threats to the dairy industry and LIC from environmental challenges, to regulation, to alternative milk products. We have to constantly be improving and adapting the way we do business.
“Standing still is not an option. In this age of disruption and radical change if we don’t continue to evolve we put at risk what you value most about your co-op and the industry.”
King said LIC was working to protect and grow the co-op, and drawing a roadmap for adapting to disruption. This included the separation of LIC into two businesses which was completed last year, the transformation programme underway and defining the co-op’s core purpose.
“LIC is in a process of change and transformation. This is about protecting the fundamentals of the co-operative while making sufficient profits to enable LIC to reinvest for the future.
“The cost efficiencies and business growth delivered through the transformation programme have been key contributors toward a better result in the 2016-2017 financial year.
“As a result of the transformation we are also expecting a significant improvement in earnings in future years.”
The next step was share simplifying the share structure, he said.
“In response to concerns raised by shareholders, we began a comprehensive review of LIC’s share structure two years ago. This review found that the current two-share structure is not best for meeting the current and future needs of the co-operative and our farmers. We believe that simplifying LIC’s share structure by moving to a single class of shares is an important step in better positioning LIC for the future and ensuring a resilient and adaptable co-op.
“The threat of disruption in the future means that we have to be able to respond in an agile way to changes and challenges that may lay ahead. Moving towards a simpler share structure will help in this process by addressing the growing disparity between LIC’s two classes of shares and making it easier in future to access capital if needed.”
However, no final decisions had been made by the board and it was still considering the best way to simplify the share structure, he said.
An update is expected early next year.
During the meeting Timothy Gibson was appointed an independent director to the LIC board and chairman of remuneration and appointments committee. He replaces retiring director Phil Lough who has been a director of LIC for 15 years. Gibson spent many years as an executive in the NZ Dairy Board, a chief executive at New Zealand Trade and Enterprise, and had been a professional company director and also consulted internationally.
Abigail Foote was re-appointed for a further three-year term as independent director and chairwoman of audit, finance and risk committee.