After closing, or selling off, several stockfeed processing sites in recent years, Ridley Corporation's strengthened balance sheet could see it buying more local or overseas assets in the coming year.
The company's annual general meeting has been told the big animal and aquaculture feed business was in a strong position to consider acquisitions if an attractively priced prospect came on the radar.
Ridley currently operates 19 feed mills from North Queensland to NSW, Victoria and South Australia, plus an aquafeed plant in Thailand.
It ended the 2021-22 year benefitting from a three-year growth plan and efficiency strategies, reporting a 16 per cent operating profit lift to $80 million and a 13pc rise in revenue to break $1 billion, despite higher grain and meal raw material costs, supply chain delays and the impact of COVID-19.
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More recently, Ridley has encountered minor flood damage to its northern Victorian bulk stockfeed sites and a temporary halt to some milling operations, and the frustration of ongoing delays to feed grain supplies caused by delayed grain harvest.
However, despite the weather setbacks, managing director, Quinton Hildebrand, tipped increased earnings for the first half of 2022-23 following rises of 4pc and 3pc respectively in bulk stockfeed and packaged companion animal product sales in the first quarter.
October also saw a strong launch for a new "Smart blend" range of dairy forage feeds.
He said the packaged and ingredients segment was benefiting from "favourable tallow and meal pricing, offsetting the impact of wet conditions and the transition to the new crop".
Strong balance sheet
After achieving shareholder return increases of almost 80pc in the past three years, Mr Hildebrand said the company's current growth plan was now targeting a further lift of at least 15pc by late 2024-25.
Ridley's balance sheet strength has been helped by asset sales in the past few years, including the Westbury aquafeed mill in Tasmania and ageing mill sites in Victoria and SA which contributed to a reduction in total debt to $22.9m at June 30.
It has also opened or expanded four mills as part of a $150m investment program.
Asked at this month's AGM if the improved cash flow, processing efficiencies and lower debt put the company in a position to buy more processing assets, board chairman, Mick McMahon, said Ridley was "always on the lookout for opportunities".
However, in recent times stockfeed business valuations had been "fairly high" and, to date, Ridley had been prioritising its own restructuring and financial performance goals.
"If valuations come into a range that may offer potential for us we should be in a strong position to take advantage of any opportunities," shareholders were told.
Confident on outlook
Although the national economy faced less certain and potentially challenging prospects in the year ahead, Mr McMahon and Mr Hildebrand were both confident the agribusiness was well placed to face the outlook.
"We see longer term strength in the agriculture sector and the value of our market," Mr McMahon said.
His managing director noted Ridley was also "in a fortunate position to be supplying customers who produce consumer staples".
Historically the stockfeed sector had sustained during material downturns in the wider economy and he expected Ridley Corporation to be resilient.
Forrest welcome
In fact, responding to another question, Mr McMahon believed the rural industry's generally upbeat outlook had encouraged mining and beef magnate, Andrew Forrest, to invest in Ridley shares.
"We operate in an attractive sector and have the ability to be well placed to grow in coming years," he said.
Shareholder activist and commentator Stephen Mayne's questioning prompted Mr McMahon to confirm he had held talks with Mr Forrest, whose family investment trust, Tattarang, has a growing portfolio of Australian agribusiness shares.
In addition to its 6pc stake in Ridley, Tattarang's recent interests have included Bega Group, Australian Agricultural Company and Huon Aquaculture before it was taken over by global meat giant, JBS.
Tattarang was a welcome investor for Ridley, Mr McMahon said.
"We have had a constructive and ongoing engagement with Tattarang, but it's no different to our relationships with other significant shareholders."
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