Ruralco profit leaps to record $26m

Strong livestock mood and cost cutting lift Ruralco profit to new record


Agribusiness
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Diverse Ruralco's live export business has turned around, livestock sector earnings are strong and water services are expanding

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Strong eastern states livestock markets and branch business activity have lifted Ruralco’s full-year statutory net profit to shareholders to a record $22.4 million.

The farm services company, with its portfolio spanning Total Eden water businesses, Ruralco’s selling agency network, livestock exports and the Combined Rural Traders (CRT) merchandise business, almost doubled its underlying net profit after tax to $26.2m for 2016-17.

While total sales revenue grew just two per cent to $1.8 billion, reflecting depressed merchandise activity in Queensland and Western Australia, operational expenditure efficiencies helped the balance sheet.

Ruralco has also pulled its Frontier International Agri live export business back into the black to record a $2.2m profit.

Frontier gained extra market-share in the beef cattle trade to Indonesia and Vietnam shipping 112,000 head for the year to September 30, although it remains cautious about growth in the near term because of the high costs involved in sourcing domestic beef cattle for export.

Ruralco managing director, Travis Dillon.

Ruralco managing director, Travis Dillon.

A turnaround in Ruralco’s restructured retail water equipment and services business, with more acquisitions and farm irrigation development projects on the drawing board, has set the scene for stronger earnings growth this financial year.

Core business growth

Managing director, Travis Dillon, said integrating  24 recent water business and agency acquisitions into Ruralco’s platform had added $6.6m in fresh earnings and extra scale to bolster the full-year result.

“I’m pleased our core traditional businesses have again delivered strong organic growth and there has been a positive turnaround in live export and water retail sales”, he said.

Generally good seasonal conditions during the year in Tasmania and much of the eastern states led to significant sales growth in the rural supplies business.

Above average livestock and wool prices and the flow-on impact on real estate sales values and volumes volumes also helped.

Mr Dillon said an 18-month cost cutting drive, which included closing half the live export business and some retail sites, had put the company on a more efficient footing.

He did not foresee any more major cost control activity, although keeping a close eye on costs was important given the company’s exposure to potential tough seasonal conditions and market downturns such as this year’s anticipated cattle price decline.

Financial services

Financial services earnings are growing thanks in part to a new insurance joint venture with Ausure, a stronger profit result from the Agfarm grain marketing partnership, and short term lending initiatives in partnership with Rabobank.

Ruralco recently launched a new “low doc” Flexi-Finance loan product so producer clients can finance livestock and equipment purchases for up to 12 months.

The group continues to diversify its earnings opportunities with more planned investment in water services, having reaped good earnings from the water sector in the last quarter of 2016-17, despite tight water market conditions in some states, notably WA.

We’ve been a first-mover in the water space and intend to keep building on that momentum, bringing new businesses into our fold. - Travis Dillon, Ruralco

“We are heavily reliant on the ag side of the business and we want to be better positioned with other earnings options, especially as we see continual growth in the water market,” Mr Dillon said.  

Water services

“We’ve been a first-mover in the water space and intend to keep building on that momentum, bringing new businesses into our fold.

“I think acquisitions will continue to be a strong area for us.

“Northern Australia, parts of South Australia and Victoria are all territories we’d look to grow in.”

Ruralco’s recent acquisitions had put it in a solid position in key irrigation markets such as the northern NSW and Queensland broadacre market, the Victorian Sunraysia and Tasmania’s pasture sector.  

Meanwhile, Total Eden’s irrigation design and service staff had a strong “pipeline” of projects booked thanks partly to recent government backed infrastructure initiatives promoting water use and efficiency, particularly in Tasmania.

These projects were coinciding with a general upturn in investment in irrigation and water reticulation works on family and corporate farms.

Live exports to China

On the live export front, Mr Dillon said Ruralco intended to be in a box seat as live cattle exports to China opened up and had spent considerable time working with Beijing’s approved importers and processors, however no significant trade was expected in the near future.

“We’ve spent a fair bit of time in China and have good dialogue a number of operators, but it’s going to be a slow burn - we’re not pinning our hopes on much activity at the moment,” he said.

Ruralco will pay a final half-year dividend of six cents a share, taking its full-year dividend to 15c.

The story Ruralco profit leaps to record $26m first appeared on Farm Online.

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