Agribusiness

Ruralco announces $4.2m net profit for FY 2016

Guest Author, November 16, 2016

Ruralco Holdings Limited has today reported a net profit after tax of $4.2 million for the 12 months to September 30, 2016.

Down from $14.1 million in FY 2015, the result reflected $14m restructuring and divestment activities, Ruralco reported today.

Overall revenue increased 10pc to $1.8 billion, and underlying gross profit increased 2pc to $304.9m.

Ruralco said its core traditional businesses achieved strong performances with rural supplies gross profit up 16% to $118million and agency gross profit up 3% to $105 million.

Ruralco’s chief executive officer and managing director, Travis Dillon, said recent restructuring activities and disciplined balance sheet management in 2016 would provide Ruralco with a solid foundation for future growth.

“I am pleased with the underlying business performance delivered this year.

“While it is disappointing that our bottom line has been impacted by the restructuring in water and live exports and divestment of our non-core farm machinery business, we are in a much better position to take advantage of changing market conditions,” he said.

Ruralco also announced today that it has reached an agreement to acquire CRT member, TP Jones & Co and its four retail locations throughout Tasmania.

The transaction is still subject to shareholder approval, which will be sought at the Group’s AGM in February 2017.

Ruralco also continues to expand its water footprint with two recently announced acquisitions in the Hunter region of New South Wales and the Murray Darling basin in South Australia.

“We have substantially increased our water services capability in Eastern Australia to match the strength of our business in the west, and there is a healthy pipeline of further water acquisitions and projects to execute in 2017,” Mr Dillon said.

Ruralco’s directors declared a fully franked final dividend of 2 cents per share with a record date of 28 November 2016, payable to shareholders on 19 December 2016.

Resized and refocused live export business

Mr Dillon said Ruralco’s livestock export business is now focused solely on Northern Australia.

“Our decision to build backgrounding and finishing operations maximises value along the protein supply chain, locking in top quality livestock for our customers in a tightening market,” Mr Dillon said.

“We continue to see strategic benefit in growing the live export business as it provides another channel to existing and new markets for our customers, such as Cambodia and China, and integrates the operations of our agency network.”

Step change partnership in insurance

Ruralco also announced a step change in its insurance business having come to an agreement to merge the assets forming the Ruralco Insurance business with established insurance brokers, Ausure Consolidated Brokers (ACB), part of Steadfast Group Limited, consolidating its insurance network across rural Australia.

“While the joint venture will allow for an immediate increase in the points of representation that Ruralco Insurance has, it will also provide better customer relationship management data, IT and underwriting capabilities, and will benefit our customers through improved pricing and products.

“There remains further development opportunities for our financial services business.

“There is a growing need for capital in the sector that is being driven by climate conditions and high livestock prices.

“This demand is stretching the limits of the traditional banks, leaving a clear gap in the market for our innovative finance team with their intimate customer knowledge.”

Execution of Future Farming Strategy

Mr Dillon said Ruralco has repositioned its strategy to focus on three pillars – Investment, Innovation and Integration.

“Innovation is integral to the Future Farming Strategy and Ruralco aims to be an industry leader in commercialising AgTech through the right partnerships and investment in innovation.

“Our venture with US-based drone and data analytics provider, PrecisionHawk, is the first of these opportunities, providing our customers with state-of-the-art, advanced technology that will enable them to discover better and faster information about their farms using safe drone technology.

“Additionally, as a cornerstone investor with SproutX, Australia’s leading AgTech accelerator program, we anticipate first mover advantage.

“This will position Ruralco as the path to commercialise new agricultural innovations.

A National Farmers’ Federation initiative backed by the Government, one hundred AgTech entrepreneurs have been identified in SproutX’s initial incubator phase.

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