Wellington, Aug 26 NZPA - New Zealand Farming Systems Uruguay (NZFSU) today posted a net loss of $US45.9 ($NZ67.79) million ($US8m last year) for the year to June 30.

The loss, is much bigger that predicted in April, when it nearly doubled the size of its forecast earnings loss to about $US20m as a result of drought in Uruguay.

The company, which uses its New Zealand dairying expertise on farms in the South American country, had initially forecast earnings before interest and tax (ebit) of up to $US10m for the year, then revised that to an ebit loss of $US11m.

The NZX-listed company was founded by rural servicing company PGG Wrightson and its former chairman Craig Norgate and listed in 2006.

It raised $US200m in equity in 2006 and 2007 to develop the dairy farms and PGG Wrightson has an 11 percent stake.

Today chairman Keith Smith said that while the year started well, the company had been hit by plummeting dairy prices, the global financial crisis and the worst drought in decades.

But he said it remained positive about prospects for the medium term, as commodity prices for milk would improve on the back of increasing demand in Asia and the Middle East and likely reductions to supply out of the United States and Europe.

He noted US milk futures were 30 percent higher than present prices on forward sales from mid-2010, but accepted they had "minimal correlation with international prices".

The company hopes that by 2012 it will have infrastructure such as irrigation and electricity lines built and that higher stock levels, increasing milk production and better returns, will boost on-farm returns.

Revenue for the June 2009 year was $US15.8 million ($US7.8m in 2008) and farm working expenses -- mostly labour, feed and cropping and pasture maintenance -- lifted from $US12m to $US22.7m.

The operating loss before market adjustments was $US15.6m and adjustments of $US23.9m included writedowns of $US3.6m (land) and $US20.2m (livestock).

Mr Smith said the company was the largest milk producer in Uruguay with milkflows of more than 45 million litres over the year.

But though the volume rose three times on last year's, milk revenue climbed just 50 percent to $US10 million.

The latest prices received were US20c/litre (equivalent to $US2100/tonne of whole milkpowder or $NZ4.30/kg milksolids.

A total of 26 milking sheds of the planned 49 are operating, 15 more than last year, and the company boosted the area in dairy production from 4700ha to 10,500ha.

It has a total of 53,000 livestock, with 11,300 cows being milked, at an average yield of 290kg milksolids per cow.

Its original plan for the year to June was for a total herd of 85,000 head and a milking herd of 20,000.

The company earlier this year raised $US30m by selling a tranche of bonds in Uruguay, with an interest-only period until March 30, 2016, to develop further irrigation and milking sheds.

But it expects that further development funding of between $US50m-$US60m will be required, and signalled a likely second bond issue this year and the outright sale or sale and leaseback of some farms.

The company owns 35,500ha, and warned in February -- when it posted an after-tax loss of $US8.917 million ($NZ17.80m) for the six months to December 31 -- that it would need more capital by June, and might sell some land if it could not borrow the money.

The NZFSU farms are in the provinces of Rio Negro, Florida, Lavalleja and Rocha, in the west, south and southeast of Uruguay .