New Zealand Farming Systems Uruguay has posted a loss of $8.9 million due to lower milk prices and the worst drought in Uruguay in 30 years.
Revenue rose 147% to $US8 million.
The company says its operations have not reached the size needed to break even, while cash flow has been affected by lower milk prices and by reduced production and higher feed costs due to the drought.
New Zealand Farming Systems Uruguay raised $US16 million from Uruguayan banks and will need more debt to develop its existing landholding. It says no performance fee will be paid for this period.
Chairman Keith Smith says the six-month results show strong progress in the development of the company's farms, and increasing productivity in both pasture and milk production.
But he says after an excellent start to the financial year, operating conditions became extremely difficult because of the combined impact of the drought, low commodity milk prices and global recession.
In response, Farming Systems Uruguay scaled back its planned dairy farm expansion and reduced stock numbers.
The drought has now broken and the company is planning to complete a further five dairy conversions by June, taking the total to 26, and increase its milking herd to 14,500 cows.
The company was set up by PGG Wrightson about three years ago.
The company says it will have to sell off land if it cannot secure $US15 million of funding within the next six weeks.
However, PGG Wrightson general manager of financial services Michael Thomas is confident the money can be secured.