A rebound in Australian rice production after two savage drought years has underpinned a whopping 166 per cent after-tax profit for national exporter and processor SunRice.
Despite the chill of increasing inflationary pressures and ongoing global freight frustrations, the company has posted a $48.7 million profit for the 2021-22 trading year, up from $18.2m a year ago.
Group revenue of $1.3 billion was up 30pc on the prior year.
SunRice has also flagged it will continue looking at consumer product acquisition opportunities to help its business further reduce its reliance on the Australian agricultural cycle, and target organic growth initiatives from existing operations.
SunRice will pay its highest ever full year dividend to B-class shareholders after benefitting from a return to milling economies of scale at home, rising global markets and a much improved sales performance by its Riviana Foods business.
A final dividend of 25 cents a share will be complemented with a special 5c dividend payment, bringing shareholders' total payout for the financial year to 40c - a yield of almost 6pc on its share price for the period.
SunRice shares climbed 11 cents after the news, reaching $7.56, which represented their highest point since the predominantly farmer-owned company listed on the Australian Securities Exchange three years ago.
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"The business has delivered an outstanding result after two years of near record-low Australian rice production," said managing director, Rob Gordon.
During the drought local production shrank below 60,000 tonnes a year forcing the company to divert resources to source product from multiple overseas points to maintain supplies to key markets.
Its southern NSW heartland crop's revival last year delivered 417,000t (up from 45,000t in the summer of 2019-20) subsequently allowing SunRice's local rice pool business to absorb its share of overhead costs after two years of drought-enforced losses by the pool.
The latest rice crop, just harvested, is even bigger at 675,000t, which augurs well for processing and marketing opportunities for the 2022-23 trading year.
SunRice's purchase of the KJ&Co Brands food business 18 months ago has also helped its Riviana snacks and hospitality food products segment, driving a material uplift in revenue and profitability.
Decoupling from ag cycle
Mr Gordon said Riviana Foods and SunRice's other food lines were now providing SunRice with a significant source of consistent earnings which was decoupled from the Australian agricultural cycle.
However, diversification in the stockfeed game had not worked so well for SunRice during the past year, with its CopRice business "hampered by market contraction" as livestock grazing conditions flourished in eastern Australia.
"The group is well positioned for the 2022-2023 year and beyond," he said.
"This is particularly the case given the resurgence in Australian supply, our capabilities in international rice sourcing and emerging drought conditions in other key rice production areas around the globe.
"We remain focused on utilising our strong balance sheet to explore further value accretive acquisitions which align with our growth strategy.
"We are continuing to invest in consumer and market-focused organic growth initiatives."
Challenges ahead
He warned, however, of substantial challenges, such as the ongoing disruption to global shipping and escalation in freight costs, plus worsening inflationary pressures on key business inputs.
While 2021-22 finished strongly, the new trading year had begun with worsening inflationary costs and continuing shipping volatility and disruption putting pressure on earnings.
Yet, despite the impacts of COVID-19 and an uneven recovery across export markets and the food service sector in recent times, Mr Gordon said the company had seen "incredible dynamism and efforts from our people".
They had already demonstrated extraordinary resilience despite unprecedented cost rises, labour shortages and supply chain complexity.
Other factors providing notable contributions to the past year included the group's international sourcing expertise from 11 countries, which allowed demand of more than 1.1m tonnes to continue to be met at different price points.
Continued cost containment discipline and volume growth had helped profitability in key Pacific markets.
Microwave success
At home, SunRice made market share gains with its microwave rice food products, supported by organic initiatives such as the relaunch of the "Our Best Yet" microwave rice pouch range.
The company expected top line revenue to continue building with the resurgence in Australian rice production coupled with SunRice's multi origin, multi-market rice capabilities.
It was well placed to benefit from an environment where key markets were under-supplied due to broader disruption from the Ukraine conflict and a number of rice growing regions either in, or entering, drought.
Looking ahead to planting next season's crop, which will be processed and marketed in 2023-24, Mr Gordon said water availability and water pricing remained highly favourable.
Water storage levels in the southern Murray-Darling Basin connected system were the highest at this point in the season in more than 20 years.
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