Bad luck and tough market cycles have caned SunRice during 2016-17, but despite losing $32.5 million in its rice pool business alone, the company held enough ground to report a $34.2m after-tax profit.
A blowout in global rice production and decade-low prices; a much-reduced Australian harvest, and even sliding mining sector demand for foodservice products were among the challenging forces contributing to a 12 per cent revenue slide and 34pc profit drop in the year to April 30.
“After five years of improving financial performance and market expansion, a range of external factors combined to impact on the business,” said chief executive officer, Rob Gordon.
SunRice’s processing, marketing and international businesses managed to just exceed $1 billion in revenue, but the group took some significant blows along the way, including a 36pc fall in net profit before tax to $8.5m for its Riviana brand, and a 24pc drop in international rice pre-tax profits to $27.6pc.
The rice pool’s revenue dropped 41pc to $281m, resulting in a $32.5m loss.
Stockfeed business, CopRice, copped a double whammy knock from depressed dairy sector markets and exceptionally good pasture growth conditions which slashed the need for supplementary livestock ration demand.
CopRice pre-tax profits slid almost 130pc to a $1.5m loss.
Ironically, rice growing conditions were far less favourable for the 2016 crop which had limited irrigation water availability, resulting in a harvest which struggled to deliver a quarter of SunRice’s international and domestic demand needs.
A new supply chain in Vietnam came to the rescue, contributing a significant 320,000 tonnes of paddy rice to the total 500,000t of overseas sourced rice.
Rebounding US division SunFoods also supplied 115,000t to the Australian farmer-owned parent company’s offshore markets.
“As a business, we had to supply enough SunRice products globally to satisfy total demand, and we (therefore) intensified our international sourcing efforts,” Mr Gordon said.
“Rather than focus on defensive tactics to counter adverse market conditions, we accelerated our business strategy and initiatives to strengthen SunRice for the future.”
Mr Gordon said a 50pc fall in the price for medium grain rice on overseas markets was exacerbated by negative macroeconomic trends in some of SunRice’s major markets across the Pacific (notably Papua New Guinea) and the Middle East.
“However, during this market downturn, our strategy effectively insulated our financial performance through the ability of our brands to support robust pricing in key markets,” he said.
The rice food business reported a stellar 1444pc pre-tax profit lift to $7.9m after producing bigger volumes and sales and achieving manufacturing efficiencies.
Its rice cake range recorded “positive manufacturing performance and cost savings”, while microwave rice achieved 16pc sales growth in Australia, although ready-to-go-meals sales were flat.
The rice food division has also launched Mini Bites in Asia and the Pacific, and Rice Chips in the Middle East.
The Riviana business’ pre-tax net profit fell $4.7m as external factors, including mining sector contraction, foodservice industry consolidation, retail pricing pressures and private label growth eroded sales turnover.
A significant importer of ingredients, it also faced continued pressure from a fourth year of currency depreciation.
Despite challenging market conditions, Riviana invested in a full relaunch of its Always Fresh range, including traditional and digital marketing campaigns, and acquired Fehlbergs Fine Foods.
The SunRice group almost halved its debt gearing to 17pc in 2016-17.
It will pay an 8pc fully franked dividend, and has a guaranteed paddy price of $415/t for the season.
The company’s annual general meeting will be held on August 25 at Jerilderie.