Rain, markets lift Ruralco profit to $12.4m

Rain, markets lift Ruralco profit to $12.4m, despite water business lag


Strong seasonal conditions, high livestock prices and good real estate market activity have driven business growth for Ruralco’s farm services agency group

Strong seasonal conditions, high livestock prices and good real estate market activity have driven business growth for Ruralco’s farm services agency group

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The Ruralco agribusiness network has posted a $12.4 million net profit after tax for the first half of 2016-17

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The Ruralco agribusiness network has posted a $12.4 million net profit after tax for the first half of 2016-17 –  up 15pc on the $11.5m reported result for same period to March 31 last year.

Strong seasonal conditions during spring, high livestock prices and good real estate market activity have driven business growth for Ruralco’s farm services agency group.

However, the good seasonal conditions were not so good news for the company’s water services business.

Higher than average rainfall in many parts of the country, while a positive driver of performance in Ruralco’s rural services business, had a counter cyclical impact on water equipment and irrigation market activity.

The water business has been more concentrated in the west and southern parts of Australia, which was reflected in the division’s weak first half financial result.

However, acquisitions of 14 new business locations in key catchment areas and agricultural centres were expected to diversify the earnings base geographically.

Farm services sales growth in rural merchandise, fertiliser and crop protection chemical products was complemented by real estate sales volumes at higher average prices.

Demand recovery in the wool market also helped bolster the division’s strong performance.

Ruralco will pay an interim fully franked dividend of nine cents per share - up from 8c a year ago.

“Our core traditional businesses have delivered top line growth driven by favourable seasonal conditions and focused cost management,” said managing director Travis Dillon.

“The investment in high quality, accretive acquisitions, has brought increased scale and diversity to our businesses, both operationally and geographically.

Chairman, Rick Lee, described progress during the first half as “satisfying”.

“Disciplined working capital management has allowed the group to maintain a strong balance sheet, providing capacity for future growth.

“This is a strong result and the board is confident in the clear path forward,” he said.

Ruralco anticipates elevated livestock prices to continue for livestock and wool during the second half.

The company noted good rainfall in South Australia, Victoria, Tasmania and southern NSW in April had triggered a solid start to the cropping season in these areas, but said more rain was needed in southern Queensland, Western Australia and northern NSW to ensure a good winter cropping season in those regions.

A restructure of Ruralco’s live export division during 2016 and lower cattle supply chain costs had helped lift earnings growth despite a 12pc decline in volume exported since closure of the southern business.

“The long-term market outlook continues to support Ruralco’s commitment to the live export sector,” Mr Dillon said.

In the financial services area, customer support for the group’s off balance sheet seasonal finance product doubled in the first half of 2016-17.

Mr Dillon said the merger of the Ruralco insurance business and staff into the Ausure Consolidated Brokers (ACB) joint venture had been completed and the operating cost profile of the division had been “right-sized” for improved financial performance.

Cost reduction benefits and the flow-on benefits of business acquisitions in the water services area were expected to lead a more normalised first and second half-year earnings split for the full 2016-17 year than previous years.

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