Ravensdown annual earnings jump 35%

Ravensdown Fertiliser Cooperative posted a 35% gain in full-year pretax earnings and said fertiliser demand has held up better than expected in the face of the dairy downturn as farmers favour grass growth over supplements.

The farmer-owned cooperative reported earnings from continuing businesses before tax and rebates of $62 million in the year ended May 31, up from $46 million a year earlier. Sales fell to $660 million from $711 million a year earlier.

Ravensdown's sales have been on a declining trend for some years, partly in response to falling prices of raw materials such as urea, but the company that supplies almost half New Zealand's agricultural fertiliser has managed to strengthen its balance sheet while investing in new plant and facilities. It will pay a rebate to farmers of $41 a tonne this year, including $21/tonne in its first-ever interim rebate. It paid a record $50/tonne rebate in 2015, having recovered from the 2013 year when drought and losses from Australian investments, since sold, led it to miss paying a rebate to its farmer shareholders for the first time in 35 years.

Chairman John Henderson said volumes haven't declined as much as some might have expected in the face of the prolonged downturn in dairy farming, which he attributed to the choices farmers are making on where to cut costs.

"They're moving away from relying on supplements and have gone back to the old tried and true – grass – and they need our nutrients to grow that grass," he said.

Ravensdown's raw material costs, such as imported urea, had "dropped markedly," reflecting global fertiliser markets that are currently "a little bit dull," he said. The company is able to pass on those lower costs to its farmers. It announced a series of price cuts throughout the latest year.

Its 2016 results include a revaluation impairment of $3 million related to discontinued activities.

Ravensdown spent $33 million on infrastructure in the latest year and said it doesn't need additional capital for its plant upgrade programme. New developments include an import store in New Plymouth which will include a blending plant similar to one recently installed and operating successfully at Hornby.

The company has no net debt. Its operating cash flow was $106 million in the latest year, down from $109.7 million a year earlier.

(BusinessDesk)

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