Just a fortnight after confirming its $50 million purchase of a new food import business, SunRice has spent another $10.8m buying the New Zealand dairy stockfeed assets of trans-Tasman poultry and feed milling business Ingham's.
The acquisition, which includes Ingham's North Island feed mill in Hamilton and the Top Cow and Top Calf feed brands, is SunRice's first foray into an agribusiness across the Tasman.
Coincidentally, SunRice managing director Rob Gordon is also on Ingham's board of directors, although he had no involvement in the poultry company's transaction or SunRice's discussions.
The deal, on behalf of SunRice's CopRice stockfeed division, is due to wrap up by March.
The purchase of another offshore revenue stream for the national rice marketer and processor has coincided with SunRice posting a $12.1m half year profit for six months to October 31.
Profit stable at $12m
Despite a tough year with minimal Australian rice to process and overseas markets fractured by the coronavirus pandemic, net profit after tax was only marginally down on the $12.5m result for the same period in 2019, although revenue fell seven per cent to $507m.
The company's heartland rice growers in the Riverina and Murray valleys harvested just 45,000 tonnes in autumn, which was the second smallest crop on record in SunRice's history.
The CopRice division actually recorded a $5m loss for the first six months after revenue fell 21pc to $53m because of a shortage of raw materials to process and negative international trade conditions during the pandemic.
To help spread its earnings options SunRice has been on a buying spree in the past six months, also paying almost $10m to acquire and upgrade the Leongatha mill and the beef and dairy business of Riverbank Stockfeeds in south eastern Victoria, plus the KJ&Co Brands portfolio of imported baked goods for its Riviana Foods division.
For the second time in a month, managing director Rob Gordon flagged he would keep actively exploring strategic acquisition and organic growth opportunities.
The NZ investment, which recorded about $23.4m revenue last financial year, would enable the company to build on existing sales relationships it had with farm retail customers in that market.
"This investment will take CopRice's 40-plus years of dairy nutrition expertise to the NZ market," he said.
"This is a strategic and significant acquisition for CopRice which will take its deep dairy nutrition expertise to one of the world's largest dairy production countries, building on our export business in NZ with local production capability."
Aside from two acquisitions in four months, CopRice has also seen some notable internal spending in the past year, including repurposing of the former Coleambally rice mill in south western NSW as a bulk stockfeed plant and reconfiguring its Wangaratta site in northern Victoria to make companion animal products.
RELATED READING
Mr Gordon said disciplined management, despite the challenges of 2020, had ensured SunRice's balance sheet remained strong and the company would leverage that strength to continue buying value-accretive businesses.
The strong balance sheet had also allowed the group to manage the first half of the financial year's challenges with great success as it started recovering from the bottom of the Australian agricultural season cycle.
Dividends to flow in 2022
The benefits flowing from recent investment in growth initiatives were, however, likely to have more impact on next year's financial results, not 2020-21.
"While the second half of 2020-21 remains challenging, we are expecting 2021-22 results to improve, in part as the larger Riverina crop is harvested and the Australian rice pool business recovers," Mr Gordon said.
Based on recent plantings SunRice expected this coming season's Australian crop to yield at least 450,000t, or 10 times more than than the 2020 harvest.
A larger crop would provide more raw product for CopRice and the company's rice food divisions, as well as giving the company a chance to start yielding greater returns from its newly upgraded bran stabilisation plant, where about $10m has been spent on improving its extraction capacity.
Other diversification highlights from the first six months of 2020-21 included an ongoing $4.5m capital upgrade of Leeton microwave rice facilities to cut operating costs and lift innovation and quality, the launch of an infant meal product range in Australia and China, and selling Australian made Brown Rice Chips in China and NZ.
However, the company also had to negotiate multiple trading headwinds such as instability in key global markets and fluctuations in foreign exchange rates caused by the COVID-19 pandemic.
Economic conditions were depressed in key Pacific markets where tourism was brought to a halt by the pandemic, while in another valued market, the Middle East, a number of governments imposed market restrictions.
Start the day with all the big news in agriculture! Sign up below to receive our daily Farmonline newsletter.