Good evening, everyone. My name is Corrigan Sowman, and I'm your Board Chair. I'd like to welcome you to this year's AGM and thank you for being here, whether you're joining us in person tonight or tuning in online. Joining me this evening, we have CEO David Chin and our CFO, Brent Mealings. Firstly, I would like to just note a list of apologies for this evening. I'll note firstly, our director, Ben Dickie, who's retiring from the board this evening and has been with us for our board meeting today, but needed to make a flight home this evening. SRG members, Shaun Baxter, Andrew Wiffen, and Dan Joho. Honoraria Committee, we have an apology for Ian Brown, who's also retiring this evening, Alan Bartlett, and Gordon Glentworth. I also have shareholders, Nicola Shadbolt and Pamela Storey, who can't be with us tonight. If I could move those apologies.
Thanks, Victoria. Firstly, just some housekeeping matters to cover off. If you're joining us online, you should see this screen. Down on the bottom left, you'll see the voting button. On the right is where you can type questions. There will be time for Q&A at the end of the meeting during general business. If you're joining us in the room this evening, the bathrooms can be found back through those doors and down to the right. In case of emergency, please make your way towards the main door and out onto the tennis courts. They're just through here. Also, I'll just note, can people make sure cell phones are on silent? Thank you. Before we get into the substance of today's meeting, I wanted to take a moment to thank you, our farmers. Every one of you plays a role in making this cooperative what it is.
As David and I often discuss, genetic gain doesn't start or end with a lab or the straw. It happens because of the choices our farmers make. It happens because of your commitment to using our services that we can deliver results and create added breeding value that stays on farm. I'd also like to offer some words of thanks this evening to Tim Gibson, our Independent Director and Chair of our People and Culture, or formerly our RIM Committee, who's contributed well into three terms with us here at LIC. Thank you very much, Tim, for the wealth of experience you've brought on our board, from previous leadership roles you've had with New Zealand Trade and Enterprise, the former Dairy Board, among others. I'd also like to acknowledge Ben Dickie, our farmer-elected director from Taranaki, who's also been on our board in excess of two terms.
Ben and his family run a multi-farm dairy operation in South Taranaki, and he's brought valuable skills around our board table as a farmer with a very strong financial background and his off-farm roles involved locally in his community, and also around governance and nationally in a representation role with Fonterra. Thank you both to Tim and to Ben. Could I also acknowledge Mark Hooper, retiring as Shareholder Reference Group Chair tonight, after many years of support for the cooperative. Thanks so much for your work, Mark, in that role. I'd also like to thank Ian Brown, who's been our Honoraria Committee Chair, and he's retiring tonight. Thank you for your services to the cooperative, Ian. Just before I hand over to Brent Mealings, let's have a quick look at the agenda that we're going to cover tonight.
Following our recap of our financial results, we're going to take a closer look at the value that we're adding inside the farm gate. From there, we're going to talk about the importance of the cooperative before diving into our strategy refocus and finishing up with our general business. Now I'd like to hand it over to you, Brent, to discuss our FY 2025 results in more detail.
Thank you, Corrigan. Good evening, everybody. Turning now to our recent financial results, revenue was up over 10% with over half the increase driven by volume growth, with semen up 26% and a 30% increase in animal health, driven by Johne’s disease testing in particular. Other strong performers were herd testing and international, up 9% and 3% respectively, year on year. The strong revenue performance contributed to a significant increase in net profit after tax. Net profit after tax was also positively impacted by an increase in the bull team valuation, reversing a negative valuation change last financial year. The directors declared a $0.1222 per share final dividend, which represents a fully imputed $17.4 million cash distribution to LIC shareholders. It is important to remember that last year's underlying earnings result was negatively impacted by two significant one-off events.
These events were the semen quality issue and the removal of the tax deductibility on commercial buildings. They contributed to just over $5 million. Excluding the impact of the one-off events, your cooperative converted the 10% increase in revenue into a 15% improvement in underlying earnings compared to last year. The co-op continued to invest in R&D, representing 8% of revenue and a 6% increase on last financial year. We will continue to be focused on delivering consistent financial results, ensuring the ongoing financial resilience of the cooperative through different stages of the commodity cycle. The strength of our underlying cash generation and balance sheet provides the fuel to continue to invest into the business, into technology enablement and R&D. It also provides the opportunity to pay a consistent dividend to our farmer shareholders.
This financial year, we anticipate underlying earnings to be in the range of $18 million - $22 million, assuming no significant events or milk price changes. As David will cover later, the co-op is investing into a multi-year program to replace legacy applications and improve customer-facing systems. This investment is predominantly into software as a service tools, the costs of which are predominantly expensed in the current financial year or in the year that they are incurred. These costs will be excluded for underlying earnings, though. I think it's important to recognize. We will continue to remain focused on our controllable costs and ensuring our ongoing capital investments are well considered. Finally, we are excited to share that improvements are planned for LIC share trading before the end of this calendar year, enabled by Sharesies.
This is an early example of where we're investing in better systems and processes to make it easier to do business with LIC. David will now provide some further business context on these results.
Good morning, everyone, and thank you, Brent, for the financial update. It's a great pleasure for me to be able to talk a wee bit to you tonight about the value that your cooperative generates, not only in its P&L, as Brent has shown, but also behind the farm gate in your herds. I'd like to start with animal health because, as we all know, healthy cows are productive cows, and that's where farmer profits are made. Over the last decade, we have invested heavily in animal health testing, Johne’s disease, and BVD in particular. Johne’s disease testing has now identified cumulatively over 166,000 antibody-positive animals. That's a huge number of cows that could have silently dragged down herd performance, and they have now been identified and can be removed from herds.
Importantly, prevalence has fallen, meaning our collective efforts and investment are changing the trajectory of this disease in New Zealand. On BVD, we have systematically reduced the number of herds with persistently infected animals. PI calves are the hidden cost centers on farm. They spread the virus, cause empty cows, and sap production. By helping farmers find and remove those animals, we're lifting efficiency and productivity across the sector. This is a great example of the cooperative principle in action. We are investing together, the benefits land back inside your farm gate. Next, let's talk about a very powerful example of genetics delivering real value and real dollars back on farm in the form of short gestation. Our short gestation length product allows farmers to bring calving forward by around 12 days.
Now, that may not sound like much, but across the herd, it translates into more days in milk, and as we know, more days in milk equals more milk in the vat. Over time, this has added up to 12.8 million additional kilograms of milk solids for New Zealand farmers. At a $10 payout, that's an additional $128 million in revenue generated by smarter genetics. This is a product that continues to grow in use as farmers look for ways to tighten calving patterns, reduce empties, and keep herds efficient. Another area where your cooperative has invested strongly is in genomics. By building the largest genotype reference population in the country, now well over 1 million genotypes, we are able to predict the genetic merit of animals at a much younger age and with greater accuracy. This means we can make better breeding decisions faster.
It accelerates the rates of genetic gain across the national herd. This is a long-term investment. The more animals we genotype, the more accurate our evaluations become, and the more value flows back to you as farmers. Now, let's zoom out and look at the big picture and what all these investments have achieved together over time. This is a bit of a case study of the Holstein Friesian breed in New Zealand. Over the last 30 years, we've seen extraordinary progress. We've added 52 kg of fat and 139 kg of protein through breeding. While the absolute amount of fat and protein has increased, so have the milk solids percentages. Fat lifted from 4.1% to 4.8%, protein from 3.3% to 3.8%. Our elite Holstein Friesian bulls are now producing and have breeding values of 9.5% solids, a world-class result. These improvements don't happen overnight.
They are the compounding result of small consistent gains each year. It's a story of long-term investment paying off, and now it's one of the key reasons LIC exists as a co-op, so we can capture these benefits for New Zealand farmers, not for offshore shareholders. What does all this add up to? In 2025, we have estimated the value we've left behind the farm gate through LIC 's products and services to be $655 million, up from $391 million in 2020. To put it simply, the majority of the value you gain from LIC doesn't just show up in the P&L. It shows up in your herds, in the vat, and in your productivity. That's the cooperative difference. We exist to deliver value on your farm, not just profits in our accounts.
Lastly, over the past 24 months, we've invested heavily in the build-out of our integration APIs in MINDA. This has been very well received with over 13 partners connected and more in the pipeline. Farmer uptake has been very strong, with more and more herds connecting, as can be seen in this graph, which shows the heat alerts from cow wearables being sent to MINDA. We're not stopping there. The next frontier is breeding cows that produce less methane. We've completed the first two stages of our methane research program, and we are now on to stage three, testing whether the low methane trait continues to be expressed during lactation. To do this, we've invested in a dedicated methane research facility at our innovation farm, the largest of its kind in the southern hemisphere. The opportunity here is massive.
If we can breed cows that are both productive and lower emitting, we future-proof the New Zealand dairy sector. This is another example of LIC investing today so that our farmers have lots of tools that they'll need for tomorrow.
Thank you, David. Preparing our cooperative for tomorrow is one of the things which was firmly at the front of the board's mind when we were looking at our refresh strategy. We want to ensure LIC stands out as a generational cooperative, one that is supporting farming families like mine, both now and in the future. Over the last decade, the global genetics industry has consolidated. Fewer players, bigger corporates, and more private ownership. In many parts of the world, the link between farmers and genetics providers has weakened. This changes the dynamic, not just in price, but in the priorities of the products that are offered. Here in New Zealand, we're different. Only a small portion of the world's milk is produced from pasture-based systems, and even less from truly seasonal grass-based systems like ours.
That makes our cows unique, it makes our systems unique, and our roles as farmers unique. The job of breeding a productive, resilient herd in this environment is unique too. That is why our cooperative exists. LIC was formed 115 years ago to meet the need of New Zealand farming systems, not someone else's. That means our genetics, our software, our testing, and our services have to deliver value where it counts, inside our farm gates. We are, and must always remain, deeply focused on protecting that core. This core is the day-to-day job our farmers do. Raising animals which thrive in pasture-based environments, which get in calf easily, and which produce efficiently and reliably. That's our core. That's where value is created. However, protecting this core doesn't mean standing still. The best way to honor our legacy is to build on it.
Much like the world-class pasture genetics, we must always be evolving. That means investing in areas that make a difference. On-farm software that makes data easier to manage, genetics that respond to changing environmental and processor expectations, and tools that reduce labor and help farmers farm smarter. Protecting the core and focusing on the future also guides our finances. We are very aware of our balance sheet. We are focused on getting the investment priorities right. That means spending for today while also saving for tomorrow. It's not just about what we deliver this year. It's about ensuring we have the foundation to deliver for next year, and the one after that, and in turn for the next generation, for my kids and for yours. As a farmer, this is personal. It's not just about business.
It's about ensuring our farm and farms like it remain viable, productive, and fulfilling places to work. That's what being a generational cooperative means. That's what sets us apart. Right now, we're seeing some good momentum. Our processors want more data to support their market claims. Banks are taking renewed interest in farm performance, and technology is accelerating. All of this creates new demand and exciting opportunities for our cooperative. We're also facing increasing competition. Global players are moving fast, and at some point, they may turn their focus to New Zealand. That means we need to be sharper, winning not just on product, but also on service and on trust.
We need to operate in a way that makes our farmers want to work with us. When LIC was formed, it was to solve common problems farmers are facing: how to test and select better cows, how to share genetic gains across farms, and how to improve productivity for everyone, faster and together. That purpose hasn't changed, but the environment around us has. We're seeing generational change. Many of today's farmers don't remember the why behind the cooperative. They see the products, but they don't see the decades of collective investment that built them. That's our opportunity to retell that story, to make that value visible, and to make the experience of using LIC 's tools and genetics as rewarding and as easy as possible. Our strategy refresh is about exactly that. It's about sharpening our focus.
It's about aligning our energy and resources to the things that truly matter for our farmers so we can reinvest and do it again next year and the year after that. The board has been closely involved in this process, and we're strongly supportive of where the leadership team has taken it. David will shortly take you through the detail, but I wanted to say clearly that we believe in the strategy. This sets the cooperative up in a way that protects what matters, while also positioning us to compete and win into the future. For me, as a generational farmer, that's what counts. If LIC is strong, my farm has a better chance of being strong. If our cooperative thrives, our sector thrives. Thank you again for being part of that journey. Your support is making a difference, and it matters.
With that, I'll hand over to David to take us through the next chapter of our strategy. Thank you.
Thank you, Corrigan. As I want to introduce the strategy refocus process that we went through, I'd just like to take a step back and look at the wider operating environment that we are all working in. I think agriculture globally is under pressure. We need to feed a growing population while also lifting farm productivity and profitability. That challenge is playing right out here in New Zealand. Our farmers, you, are expected to produce more with less. There's greater emphasis on emissions, reduced fertilizer application, stricter labor, and animal welfare requirements. LIC's role is clear. To make sure that through genetics, animal health, and farm technology, we're helping you, our farmers, meet this challenge head-on. It's not just about producing more milk. It's about how we do it.
As an industry, we must protect our social license to operate, which means reducing emissions intensity, reducing nutrient loading, and safeguarding our ecosystems. These aren't just regulatory requirements. They're market requirements. Our customers offshore want to know New Zealand milk is the most sustainable in the world. That's why investments like methane reduction research and Johne’s disease testing matter. They keep our farmers ahead of the curve. We believe that the herd of the future needs to be highly efficient, aligned to the needs of our consumers and processors, lower emitting, and fit for purpose. What's LIC's job in all of this? Our strategy is laser-focused on herd improvement, breeding great, efficient cows, and doing this faster. It's the day-to-day job you do on your farm, raising cows that thrive on pasture, get in calf easily, and produce efficiently.
Everything we invest in, from genetics to software to animal health, must support that singular mission. If we get that right, value flows back to you, and New Zealand dairy stays globally competitive. This is what our strategy is all about: sharpening our focus, deploying our resources to the things that truly matter on farm, creating the financial strength to reinvest again next year and the year after that. The board and leadership are aligned on this, and we believe this strategy positions LIC to compete and win into the future. We believe this strategy is about investing for today and tomorrow, balancing short-term delivery with long-term resilience. I want to now unpack five areas of our focus that will deliver to New Zealand farmers world-leading herd improvement. Let me start with something very important. It's how we serve you, our farmers.
LIC has always been about delivering value on farm, but we know we can't stop improving the way we work with you. That's why we're putting the farmer needs at the heart of every decision we make. We're investing in better systems and processes that make it easier to do business with LIC. We're gathering and using customer insights more deliberately, making sure we're working on the right things and the things that matter most to farmers. Because at the end of the day, this is your cooperative. If we're not meeting your needs, we're not doing our job. It's not just about what we deliver; it's how we deliver it. Farmers want a service that is consistent where it counts and flexible where it matters.
That means you can rely on us to be there season after season with the core services that you are depending on, whether it's AI, herd testing, or MINDA. It also means giving you the flexibility, breeding options that suit your herd goals, and tools that fit with your farm systems and support, and that recognizes that one size does not fit all. Our investment in customer experience is about striking that very balance: consistent delivery combined with the flexibility that makes your life easier. Of course, the core of what we do is genetics. Here, too, we're focused on delivering more value back to farm. We're building smarter breeding programs that help farmers be more precise and purposeful. That means using the right mix of conventional semen, sexed semen, beef genetics, and short gestation length semen. It's about breeding with intent, not just getting cows pregnant.
It's about getting them pregnant with the genetics that unlock the most value for you and your farming system. Better breeding decisions create stronger and more productive herds, and that translates directly into better profitability on farm. Alongside genetics, we're also looking at the next wave of testing solutions. We want to do more than predict performance through genomic testing and other innovations. We want to predict health issues before they arise. Every milk sample, every ear punch should be giving farmers more data, not just on production and performance, but on animal health and resilience. This is not something LIC will do alone. We're committed to collaborating more with dairy vets and other partners to minimize disease on farm and lift overall herd performance. This is about turning today's testing into tomorrow's insights, helping farmers make better decisions with more confidence and more speed. Onto farm software.
Right now, we're seeing real momentum in our industry. Processors are wanting more data to support sustainability claims. Banks are more interested in farm performance, and farm technology is advancing rapidly. All of this creates demand for LIC's tools and services. When we talk about insights, MINDA is the hub that brings that all together. Our goal is to connect more test data seamlessly into MINDA, so the information you need to make breeding, culling, and health decisions is right at your fingertips. That means less time chasing data and more time acting on it. We'll continue to integrate testing, genetics, and herd management in one place. The decision-making power for farmers grows exponentially. That is where we're heading: a smarter, simpler experience that makes data truly work for you. Finally, I want to touch on one more important part of our strategy: our international business.
LIC has always been proudly focused on New Zealand farmers. That will never change. Your farms are at the heart of everything we do. Our international business is becoming an increasingly important part of our cooperative story. By investing in international markets, we're strengthening our breeding scheme. The scale we gain from operating offshore gives us resources to fund more innovation, innovation that ultimately benefits every New Zealand farmer. There is also huge value in the insights we gather from international markets. Different farming systems, different genetics pressures, different customer needs, all of this information feeds back into our programs, and that accelerates the rates of genetic gain we can deliver in New Zealand. Our international strategy is very clear. We are not trying to be everything to everyone. We are focused on being world-class in pasture-based genetics because that is where we believe we can lead the world.
Ultimately, international success strengthens LIC at home. That is why international growth is not a distraction. It is a way of the future. It is a way of future-proofing the cooperative and ensuring we keep leading in the field of pasture-based dairy genetics, not just here, but worldwide. Let me finish with the big question. Why does all this matter? At the end of the day, it comes down to one thing: your herds. To stay competitive as New Zealand dairy farmers, we need high-performing herds, cows that are productive, efficient, resilient, and bred through world-class breeding programs. Genetics alone is not enough. To get the best out of herds, we need smarter tools, tools that connect data, insights, and the systems that farmers use every day. That is how we make better, faster decisions on farm. That is how we capture more value in the vat.
Above all, this matters because LIC must remain a strong generational cooperative, a co-op that is easy to work with, that listens to farmers, and invests not just for today, but for tomorrow. If LIC is strong, your farms are stronger, and if our co-op thrives, our whole sector thrives. That is why all of this matters: world-class herds, smarter tools, and a co-op built to serve generations of New Zealand farmers. How does this vision of the future all come together? I would like to share with you a short video that will demonstrate how our investments that we will be making into the future, these include connected mating plans, dairy beef, growing MINDA integrations, and improving the old farmer experience, how that will come to life for you on your farm.
For our Kiwi dairy farmers, LIC makes herd improvement easy and convenient. Support is always available, either on the phone or from their rep. Our herd improvement software gives farmers the ability to pick their AB products as part of a multi-year mating program tailored to meet their specific goals. This gives farmers the keys to their own data and ultimately to the future of their herd. Through MINDA, farmers have the power to explore breeding scenarios and update their mating plans, while also knowing that any changes will update the LIC’s route . In the paddock, we're collaborating with technology partners such as those supplying wearables to send information on pre-mating heats back to the AB teams.
This cuts down on waste and means by the time the AB tech lands on farm, their van is stocked with the very products that will bring the greatest genetic gain to that specific herd. As the herd enters the mating season, LIC is at work once more, collecting heat alerts from animal wearables and ensuring those which are ready for mating today are pushed through the automated drafting gates and waiting for the AB tech. With less resistance in the journey, more farmers are removing their natural mating bull, extending their AB period, and making use of our grown beef offering. A new app is used by the AB tech to log their inseminations, runs on the same charts as LIC's farm software MINDA and uses a familiar view.
This consistency builds trust with farmers and lets them see the grand plan coming to life in their herds, allowing them to be confident that the right straw is going into the right cow. As the herd sails through the mating period, farmers can track their progress, viewing key metrics like return rates with alerts that help identify any problems early on. This report adds to and broadens the wisdom the farmer is getting from the wearables app and their feed, creating more value on farm. Just one of the many ways LIC is helping support farmers to develop their herd improvement.
Thank you, David. Can I ask Shirley to come to the stage and deliver the honoraria report? Thank you, Shirley.
Good evening, everyone. Now, the Honoraria Committee is tasked with setting a remuneration that actually, don't make it too loud. I can hear myself. Basically, we're tasked to remunerate the board and Shareholder Reference Group appropriately. Mr. Chairman, board members, Shareholder Reference Group, CEO, staff, and shareholders of Livestock Improvement Corporation. Our committee is made up of four independently elected members: myself, Anna Brown, Gordon Glentworth, and Alan Bartlett. We're tasked to analyze current trends, to find a benchmark using information taken from Strategic Pay and New Zealand Institute of Directors surveys. From here, we analyze and identify where LIC best fits across the agricultural sector. Factors considered are livestock improvement. It's not a single operation. We've seen this. There are different sectors across the organization, meaning that the knowledge required to be an effective board member is not limited to knowing one part of the organization.
Research, technology, genetics, herd testing are just some of the areas that make LIC unique. Farmer-elected and independent board members each bring their own set of skills and, more importantly, are required to understand the overall organization to be able to contribute effectively. Independent directors and farmer-elected members receive the same base honoraria. Because the independents are brought into the organization with their specific set of skills, it is challenging to establish a benchmark that attracts the caliber of director for the area of expertise required to retain that high caliber and meet shareholder expectations to manage that benchmark judiciously. Also, farmer-elected directors must have recognition for the opportunities foregone while away on board business from their own enterprise. Another factor is compliance obligations the LIC board has, given its listing on the NZ Stock Exchange. This is a factor few agricultural industries need to consider.
Livestock Improvement is not comparable with other industries, bodies, in that it has more than one operation and is acknowledged as a leading organization for its role in the dairy sector. This poses challenges when considering recommendations. Each year, we meet with the Chair of the Board, an elected board member, and the Reference Group Chair to question the role and time commitment each has. We do this to establish the remuneration comparative to others with similar turnover, staff numbers, and asset base with other factors. We also meet with the CEO to receive an overall picture of the organization, how it has tracked, and the expectations for the following year. This information builds a picture of the organization, the board workload, and past and future, so it is with pleasure I get to present the recommendation to this Annual General Meeting.
The Honoraria Committee recommends the following: the pool fund of $70,000. This is set aside for discretionary remuneration to specifically compensate directors for extra duties, skills, and roles, including committee chairs. The Honoraria Committee recommends there is no change to the pool. The board honorarium. While the remuneration must reflect industry standards, incremental changes rather than large increases are considered prudent. Therefore, the Honoraria Committee recommends the following: the Chair increase from $145,000 to $150,000, Directors increase from $71,000 to $74,000. Now, the Shareholder Reference Group. This group are independently elected shareholders whose purpose is to work collaboratively with the board and management to promote the interests of the shareholders and assist the company to deliver on its purpose and vision. Given its unique role, benching the SRG against another organization is difficult, given there are no other organizations with similar roles for comparison.
This is where discussions with LIC management, board, and the SRG help form our view. Fair recognition for the role, commitment off-farm, and ensuring LIC continue to attract farmers with a keenness for the role, the committee therefore recommends the following for the Shareholder Reference Group: the Chair an increase from $42,000 to $44,000, the Deputy Chair an increase from $21,000 to $23,000, group members an increase from $15,000 to $16,500. The SRG has the facility of the daily allowance for additional duties where required. That is why the SRG does not have a pool of funds. The daily allowance. The daily allowance is used for SRG for days spent on LIC business over and above their normal meeting schedule. Just to note, the Honoraria Committee also received the daily allowance, and it's one of the most uncomfortable things because we're actually trying to not think of ourselves.
We're actually thinking the SRG. The committee is recommending an increase from $400 to $500 as their daily allowance. In closing, a few acknowledgements are in order. I've been tasked with thanking Janine Lockery for her knowledge and support as Secretary to the Committee. She's out there somewhere. I can't see it, but anyway. Janine contributes professionally to the committee with a legal perspective and her contribution on the evolving nature of the SRG. This support is invaluable. I also want to take this time to make special mention to Ian Brown for his significant contribution to the Honoraria Committee and other roles he has held in LIC. Ian has chosen to step down, and it is with pleasure I get to thank him tonight on behalf of Alan, Gordon, and myself at the AGM and acknowledge his time on the committee.
Thank you, and I put the Honoraria Committee recommendations to the shareholder. Can I have a seconder? Thank you, Mark. The floor is yours, Corrigan.
Thank you very much, Shirley. Now for the meeting resolutions. I'll read through each resolution and allow time for those online to vote. Item two, to approve LIC's directors' remuneration, to receive and consider the LIC Honoraria Committee's recommendation as to directors' remuneration, and if thought fit, to resolve by way of ordinary resolution to approve the total remuneration of all nine directors to be a maximum of $812,000 per annum. If I could have a mover. Shirley? Thank you. And seconder? Yep. Thanks. Item three, to approve LIC Shareholder Reference Group remuneration, to receive and consider the LIC Honoraria Committee's recommendation to the Shareholder Reference Group remuneration, and if thought fit, to resolve by way of ordinary resolution to approve the total remuneration of all s members being increased to $232,500 and the daily allowance being increased to $500 per day.
If I could have a mover on that, thanks. And a seconder? Thank you, Duncan. Item four, to reappoint KPMG as external auditor, to consider and if thought fit, to resolve by way of ordinary resolution to reappoint the chartered accountancy partnership KPMG as auditor until the conclusion of the company's next annual meeting and that the directors be authorized to fix its remuneration. I'll move. If I could have a seconder? Thank you, Victoria. Item five, to ratify the appointment of Hamish Rumbold to the Board of Directors, to consider and if thought fit, to resolve by way of ordinary resolution to ratify the appointment of Hamish Rumbold as an appointed director to the board for a term of two years from the conclusion of this annual meeting. If I could move that and a seconder, thanks. Thank you, Tony.
Item six, to ratify the appointment of Blair O’Keefe to the Board of Directors, to consider and if thought fit, to resolve by way of ordinary resolution to ratify the appointment of Blair O’Keefe as an appointed director to the Board of Directors for a term of three years from the conclusion of this annual meeting. If I could move and have a seconder, thanks. Thanks, Duncan. Item seven, election of one elected director for the North Island region, to consider and if thought fit, elect one candidate representing the North Island as an elected director to the Board of Directors for a term of three years from the conclusion of this annual meeting. If I could move that and look for a seconder. Thank you, Mike. That concludes voting this evening. I'll give those casting votes a further minute, and then we can open the floor for general business.
While those final votes are being cast, if you do have a question and you're in the room, if you'd like to raise your hand, we will bring the microphone to you so that those that are online can hear also. For those online, if you could please give us time to collate your questions that you enter, we'll deal with those very shortly. Great. Are we happy that those votes have been collected? Excellent. Thank you. I'd like to open the floor for general business and look for questions. I'll take questions firstly from in the room. There's a question here at the front with Jared. Thank you, Catherine.
Thank you, Corrigan. I have shared this graph with you earlier in the year, and I'm sharing it again today with the AGM. It's a graph that shows the change in profit of LIC and the change in the value of the LIC bull team. Basically, this is a seesaw graph that goes up and down by between $30 million and - $10 million year on year. If we have a look at it, it goes up and down erratically. When I have a look at the segment sales for New Zealand genetics, it has consistently gone up by about 3% or 4% year on year. We have a valuation shift here that's 3x greater than the typical change in revenue for New Zealand genetics.
Thank you, Jared.
My question really is, how can we smooth this? Because the value of the bull team shouldn't jump up and down as wildly as that.
Thank you for the question. I'm going to look to you, Brent, to help to answer that. Firstly, just to give context to a biological asset like that, the first thing that we've got to appreciate is the international process of managing that. As a board, we have quite a complex process to evaluate that biological asset. There are a number of different factors. Brent, I'd appreciate it if you could elaborate on the detail that sits behind that, both in terms of the factors for the year and also kind of looking forward around that bull team valuation.
Thanks for the question. I think there's two points I wanted to just make and reiterate perhaps as well. First of all, the reason why we talk about underlying earnings rather than focusing on net profit after tax is purely because of the valuation changes in the bull team valuation. When we think about the dividend as an example, we always refer to the underlying earnings for that reason to get rid of that valuation in our thinking. The second point is that I understand that, I definitely understand where you're coming from. I guess the issue we currently have is it's a requirement to do. We can't not do it. The two key inputs that really drive the variability are basically milk price, which we know can be variable, and interest rates.
To the extent that those two factors are more stable, that will also reflect a more stable bull team valuation.
Thanks, Brent.
Just to keep this, I can just carry on from that. When we look at the auditor's report, they basically say we agree with your inputs to your black box. All I'm suggesting quite strongly is that the black box has got some flaws in it because you shouldn't see that degree of variability when the underlying earnings, which is New Zealand genetics, has consistently gone up and down by 3% or 4%. Up and down $30 million is like 25% in bull team valuation. They're not consistent.
Thank you. We'll note the point. Happy to talk further about that offline, but we've got the auditor sitting here somewhere in the room. I know they're happy, and we have recently, haven't we, worked on our process and looked to redevelop, I suppose, the technology that sits behind that bull team valuation to make sure that that's very sound. I'm confident as Chair on the process that we're using for that. The question here.
Yeah, hi, my name's Andrew Myers. I farm near Cambridge. Firstly, I'd just like to congratulate you on the use of the word pasture in your strategy refocus. I was really impressed with that. My question comes about competitiveness. David, you brought that up, the words competitiveness. In the milk processing industry, there's been significant competition from overseas, and it's come based on price. There's a proportion of farmers that walk on price, and we've seen that year on year consistently. I was just wondering if you could comment on your competitiveness on price and your initiatives to be competitive on cost to farmers.
Thank you.
Thank you, Andrew, and I appreciate the question. I think the way we look at the products and services is in terms of the value that we deliver on farm, and we organize the way that we present those products to market accordingly. Like the processors, there's a lot of competition both domestically and internationally for genetics, so we're not immune to that. We really try and take a value-based pricing approach, and we see that if we're delivering value to our farmers, then they'll continue to support the cooperative. Being cognizant of the fact that we're making long-term investments for future innovation, part of the price goes to fund not only what we deliver today, but the products and services that we want to deliver tomorrow.
That's a lot of what we talked about in the presentation, around ensuring that we hold ourselves accountable to the value that we're delivering on farm, that we're measuring that, so that the value that you see in our products, we can actually point to that and say how we're improving that for our farmers.
Thanks, David. Further questions? All right, I'll take one online. Thank you.
Yeah, I've got one here from Richard Stalker. As a keen user of short gestation length genetics and other innovative products from LIC, what is LIC's dividend policy, and does the current level of distribution of profits through dividend affect our ability to invest capital in long-term opportunities?
Thank you, Marise. I think if I could answer that question, particularly on behalf of the board around our dividend policy. Our range that we've typically got in our dividend policy is sitting between 60% and 80%. Last year, we paid out 60%, if I remember correctly, and this year 80%. The caveat sitting alongside that policy is the liquidity inside the company and our need for reinvestment inside the business. We take a balanced approach to that, which we did last year, and again, we have done this year.
Okay, the next question is from Mark Meyer and Murray Jagger. At the 2020 AGM, shareholders voted in, and the new governance and representation recommendations were adopted. Shareholder council disbanded, board size reduced to six, three in the North Island, three in the South Island. The board would also be. The ask is, what is the board doing with intentional shareholder engagement?
Okay, thanks for the question from Mark and from Murray. I'd also like to acknowledge the receipt of a letter from them, which I've circulated to the board this morning on this matter. We take a number of different approaches to shareholder engagement, and I'd like to bring you in too to answer this question, David, more particularly around what we do here at Newstead. If I could share from my perspective as Chair and the approach I guess I would take as we go forward, I think the platform that we've set at this AGM tonight around our presentation is one that I greatly respect the time that farmers have available. I think it's really important that when you're going out to farmers, you're going out with something to talk about.
Certainly, I think in the last two years that I've had the opportunity to lead the cooperative in the Chair role, this last 12 months has very much been characterized by the work we've done around our strategy refresh. We've been quite deliberate that we needed to do that work internally. We needed to set those foundations before we were ready to go out and talk to farmers. I take the challenge on board from Mark and from Murray in terms of director engagement with shareholders, and I look forward to bringing the strategy refresh that we've talked about tonight more directly to shareholders around the country in the year to come. David, would you like to share some of the work that's gone on, particularly since we probably got through the challenges of COVID around shareholder engagement in terms of bringing shareholders here to LIC?
Yeah, one of the things we've found most impactful is to bring farmers to LIC for what we call a shareholder experience. That's been really well received. We are investing and want to continue doing that. I think our challenge, and we talked about it today as well, is how do we connect with farmers through different means and meet them on their terms. We are still thinking about how we get further out into the regions and bring up these issues. We know that the traditional modes of doing that, you know, in the local school hall probably don't work anymore. We've got to kind of reinvent that mode of engagement and connection. That'll be something that we turn our minds to in the future, as well as bringing shareholders to our head office campus.
Thanks, David. Any further questions, Marise?
Yeah, one more. What is the history, the purpose, and the future intentions for the shares held as treasury stock in excess of 5 million shares and the second largest shareholding? Shareholders surely would be better served by the cancellation of these shares.
That's a good question. Brent, have you got a view around our use of that treasury stock?
I need to say that we don't have a particular view at this point in time on those shares. We haven't cast our mind to that. I guess there's a number of factors we'd need to consider as part of that. No, we haven't.
I am happy also to take that question back to the board and consider it appropriately.
I've got another question just in. This one is, the share price is well below both the NTA and the value in use methodology. What steps, if any, are intended to reduce this value gap? That's come from Catherine Jones.
Brent, I wonder if, and I think just would mention to the Sharesies announcement this evening, how we would look to manage liquidity in our shares and for that example of going to a platform like that.
Yeah, it's not lost on management, the value of the share price relative to the value of the company in the earnings. Firstly, I just make that point. Yes, liquidity is a significant challenge, and we're hopeful that the Sharesies platform, if you look at the success that the Fonterra shareholders have had trading through Sharesies, that may provide more encouragement and make it a lot easier for LIC shareholders to trade those shares. The liquidity may be part of the answer, but I don't have a better answer to that value gap at this stage.
Any further questions, Marise? Any further questions from the floor tonight? No? Thank you very much, everybody. That concludes our meeting. I declare the meeting closed and voting results will be announced later this evening. If you'd like to join us now for refreshments next door in the social club, you'd be very welcome and look forward to talking to you there.