Friday, July 1, 2022

Departure not related to losses

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LIC chair Murray King has defended the performance of departing chief executive Mark Dewdney. Dewdney’s departure, announced late last year, came after the genetics company faced a decline in its net profit from $17.6 million to $15m in 2011/12. This was despite a 7% increase in sales revenue over the same period. October last year was also the date for repayment of a $10m loan LIC made to PGW’s Chinese parent company Agria, to assist Agria’s takeover of PGG Wrightson. So far only half that amount has been repaid. Agria, which has undertaken to repay the second half by March 2014, has had to extend its $25m financing facility to April 2014.

Dewdney told LIC shareholders at its annual meeting last year the loan had been made with the intention of influencing the direction of PGW’s grass research.

It was also during Dewdney’s tenure LIC took an $8.16m hit with its sale of a 20% stake in Tru-Test. This share was picked up by Gallaghers, and at the sale in 2010 Tru-Test chair John Loughlin described the purchase as a bargain for Gallaghers.

Dewdney told the Dairy Exporter in a written statement he felt his departure had had “adequate coverage” and did not want to discuss it further. He said he was proud of LIC’s achievements over the past seven years, current strategy and staff.

“The company’s future is sound.”

A large portion of the 2011/12 profit reduction was attributable to LIC having to pay $4.7m in compensation to early adopters of the company’s DNA Proven genomics product.

DNA Proven failed to deliver on its promises of increased breeding worth (BW), with poor sire performance in some cases. The data from genomics continues to be withheld from the national data figures until the genomic BW predictor more closely reflects BW determined through traditional sire proving.

The impact of the genomics issue continued to reverberate into the 2012 financial year, with a hairy mutant calf gene presenting in 1500 animals. However, the corporation remained staunch on no compensation being offered (Dairy Exporter, December, page 61). The high-profile genetic mutation continues to be disputed by a small group of farmers and a complaint has been laid with the Commerce Commission.

In the meantime, despite good farmer feedback on the genetics, Deer Improvement continued to make only a small profit, King said. The national deer herd is almost half what it was when the business model was established in 2004.

Not related

Despite more than $13m in accounted losses incurred through genomics and the share sale during Dewdney’s stewardship, King said these were not related to his departure.

“As we pointed out earlier, Mark was going to be in the position for seven years. It is a timeframe he expected to be in the job for. There is nothing untoward in him going now.”

When asked on the losses incurred over that time, King said that happened in every business.

Annual report data reveals a significant pay rise for the chief executive in the 2011/12 year. Data from 2010/11 indicates the top pay level was from $670,000-679,000. However, in the 2011/12 annual report, the top salary increased significantly, to $910,000-919,000.

LIC shareholders council chair Jenny Morrison said it had addressed each of the issues as they arose.

“It is not our place to question management. We have left decisions to the board.”

She said decisions around the chief executive were “straight board decisions”, but she acknowledged the lack of hairy calf compensation continued to be an issue for a small number of shareholders.

She also agreed LIC might need to regroup around its core business of genetics to retain farmer confidence, which had taken a knock during the past two years.
“If you do not look after your customers you do risk losing goodwill.”

This year the council intended to refocus on its constitutional requirements to ensure the board continued to deliver on its strategy.

“Especially with a new chief executive, we want to ensure we keep that momentum.”

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