State-owned enterprise Pāmu, also known as Landcorp Farming Limited has updated its Net Operating Profit full-year forecast due to Cyclone Gabrielle impacts on 24 of its farms and softer milk prices.

The company now expects a full year Net Operating Profit of between $39 and $44 million compared to its original budget forecast of $55m contained in its Statement of Corporate Intent.

Chief Executive Officer Mark Leslie said: “Our early assessment of the damage caused by Cyclone Gabrielle is $6.5 million over two years, with $2.5 million falling into the current financial year. The cost will be a mixture of operating and capital expenditure.”

The change to expected Net Operating Profit also reflects a reduction in forecast revenue from both dairy and livestock. The forecast milk price falling from $9.00 per kilogram of milk solids in February to $8.50 per kilogram of milk solids, combined with lower-than-expected milk production has reduced forecast milk revenue by $14.6 million.

“Lower milk production mainly occurred in the first half of the season due to wet spring conditions impacting pasture growth although a wet summer has seen a small recovery in milk production,” Mr Leslie said.

Offsetting the lower forecast milk price is a forecast $13m gain on the organisation’s milk futures hedge position.

Pāmu expects livestock revenue to be $14.3m lower due to a combination of Cyclone Gabrielle, softer sheep prices, and lighter animals from Southland and Te Anau farms which have experienced dry conditions the past two summers. Cyclones have exacerbated the situation with wet conditions in the North Island requiring lower margin store stock sales versus planned animal sales to processors.

Farm working expenses have continued to remain high due to interrupted supply chains and the Russia-Ukraine war. The annual increase to December 2022 in the farm expenses price index of 15% is more than double the consumer price index for the same period.

“Despite these challenges, forecast Net Operating Profit remains significantly higher than $22 million the year prior. This forecast obviously assumes there will be no adverse weather conditions over the remainder of the season, material changes in foreign exchange rates, or market prices,” Mr Leslie concluded.