In February’s Country Wide Dunedin-based agricultural economist Ray Macleod argued it was time for Landcorp (Pamu) to sell its farms. Pamu chief financial officer Steve McJorrow responds.

There are many inaccuracies in Ray Macleod’s article, but I will pick up just a few examples. Our EBITDAR/Assets ratio (excluding asset revaluations) is 4.3%, and not the 3.7% claimed by Macleod, which is in line with other rural companies. Macleod claims we are being mischievous when it comes to our accounting for revaluation gains on our biological assets. It is a requirement of the International Accounting Standard IAS 41 to account for revaluation gains in this way. While he is correct that the fair value gains on breeding stock are unlikely to be realised, it is unfair to criticise us for adhering to accounting standards. Similarly our asset revaluation reserve is not ‘smoke and mirrors’ as MacLeod implies – just more adherence to accounting standards.

MacLeod claims other equity of $306 million noted in the report is “Landcorp speak for shareholder advances”. That is incorrect. There is no connection between other equity and shareholder advances. If Landcorp were to receive a shareholder advance (we have not) it would be accounted for as a liability on the balance sheet, rather than other equity. Macleod’s assertion that our core debt level is close to $670m is not correct if you define core debt as money currently owed to its bankers. Landcorp has banking facilities of $315m and the amount of debt outstanding through this arrangement as at June 30, 2018, was $209.1m. MacLeod is critical of us talking about the work we are doing to be environmentally responsible farmers. We are proud of the work we are doing in the environment and do not apologise for highlighting it.

Given the criticism farmers get from city dwellers about environmental performance, all of us in the sector need to be showcasing the environmental protection work that is happening throughout the country. Like all our hard-working colleagues in the rural sector, we are toiling hard to improve our financial and environmental performance – we claim no greater or lesser merit for that than anyone else. We are also trying to be transparent about our performance– the good and the not-so-good. To criticise Pamu for delivering an honest assessment of our year’s performance is unfair to the hundreds of Pamu people who get up every morning to be the best farmers they can be.


It was pleasing to receive the Landcorp response to my article entitled “Time’s up for Landcorp”. No reasons were provided to suggest that time isn’t up for Landcorp. EDBITDAR for the 2017 year was $35.6m on an asset base of $1121 billion (balance date value less revaluation reserve works for me) a 3.17% return on assets at cost, not the 3.7% I reported and not the 4.2% Landcorp claims. I used Landcorp data from the 2017 financial report, assuming it reliable. Landcorp’s EBITDAR prediction for this year of $37m to $41m is equally unflattering. Remove revaluation changes and will it be an operating deficit? To be clear I agree with reporting in line with international accounting standards. I indicated these can act as smoke and mirrors, effectively hiding operational performance. That is still the case and as an experienced director I don’t need a lesson in financial reporting from Landcorp.

Apparently “other equity” isn’t technically shareholder advances, but it exists and comes from somewhere. Without evidence otherwise my view is it may represent financial bailouts. And debt is debt, the definition is you owe someone something.

Nor did I criticise Landcorp over QEII activities, I merely pointed out many farmers initiate QEII covenants using their own money and without the fanfare. I agree be proud of environmental progress but remember who the stakeholders are and start with efficient farming models. Landcorp dairy operations look sad and you can’t blame sharemilkers for this.

I accept most staff do the best job possible, I never said otherwise. Seeking to implicate operational staff is a ploy to deflect focus away from where the problems really lie. The focus of the opinion piece is the soundness of the business, its management and various interesting claims.

Yes indeed, time to sell up.