THE SunRice Group has posted a net profit after tax of $18.3 million in its 2020-21 (May-Apr) financial year, down 19 per cent on the 2019-20 result.
Its 2020-21 revenue of $1.03 billion is down 9pc on the year, while earnings before interest, taxes, depreciation and amortisation of $49.1 million were down 25pc on FY20.
SunRice released the results yesterday, and said they reflected challenging conditions, namely the COVID-19 pandemic, and the second consecutive year of critically low Riverina rice production
With improved Riverina production and delivery of other strategic and organic growth initiatives, the group’s earnings are expected to recover in the current financial year.
“In such a challenging year, when we responded to the COVID-19 pandemic and the second consecutive year of near-record low rice production in the Riverina, the SunRice team has delivered a resilient set of results of which we can be proud,” SunRice Group CEO Rob Gordon said.
“With only 5pc of our rice requirements available from the Riverina, we knew the year would be challenging and planned accordingly.”
SunRice had total sales in FY21 to key international markets of more than 1M paddy tonnes (pt).
“We will continue to maintain and build our capability in multi-origin, multi-price international rice sourcing, with this improved capability making our business stronger for future growth with the recovery of Australian rice production.
“We sourced rice products from 12 countries to meet demand in approximately 50 markets, and paid record rice prices at farm gate in the Riverina to maintain baseline production, retain core skills and replenish seed stocks for a larger crop in 2021.”
Continued impacts of COVID-19, including disruptions to international shipping, and increasingly deteriorating conditions in key Pacific markets, affected FY21 results, as did critically low rice production of 45,000pt, the second-smallest crop on record.
This resulted in the Rice Pool being unable to absorb all its overheads, and led to the segment having a pre-tax loss of $22.1M.
The performance of the group’s International Rice segment more than offset deteriorating results of its Rice Pool and Corporate segments.
The reduced Australian rice crop saw SunRice’s pool offer fixed-price contracts in 2020 (Jan-Dec) of $750-$1500 per tonne.
These high prices reduced performance of the CopRice and Rice Food segments, whose results in part rely on inputs and by-products from the Rice Pool business.
Also, improved seasonal conditions in eastern Australia boosted pasture availability, and reduced demand for supplementary feed products across multiple CopRice product categories.
Improved FY22 outlook
Rain in rice-growing regions and inflows into irrigation storages mean the Riverina rice crop harvest in recent months is expected to be around 420,000pt, close to 10 times bigger than last year’s crop.
While below historical average crop size, the increased volume means the Australian Rice Pool Business should again be in a position to absorb its share of overhead costs for FY22.
The crop is now being processed in SunRice’s Riverina facilities and will allow the Australian Rice Pool Business to reenter premium export markets, which were serviced in FY21 by SunRice’s international supply chain.
The return to more favourable seasonal conditions will also contribute to SunRice’s CopRice and Rice Food segments which in part rely on Rice Pool Business products.
The group is anticipating improvement in earnings in FY2022, but said this is likely to be slow as distributor stocks built up during COVID-related disruptions in key markets run down.
An extension to 2024 from 2022 has been granted by the SunRice board of directors for delivery of the SunRice Growth Strategy.
“There is no escaping the significant impact the two years of extremely low production in the Riverina has had on our business.
“We have executed a deliberate strategy to build our international sourcing capability which, in combination with increased contribution from our US subsidiary, SunFoods, allowed the company to offset the substantial loss in the Rice Pool as we ran out of rice to process towards the end of the financial year.
SunRice’s FY21 headline acquisitions were Riviana Foods’ purchase of KJ&Co Brands, and CopRice’s first operational expansion overseas, its purchase of Ingham’s dairy feed business in New Zealand.
CopRice also bought Riverbank Stockfeeds, a dairy and beef feed business at Leongatha in Victoria’s Gippsland region.
At Leeton in the NSW Riverina, the group spent $10M on a bran-stabilisation plant.
“Given the strength of the Group’s balance sheet, we are continuing to explore further acquisition opportunities that have the potential to meet our strategic and financial investment criteria.
“With the return of Australian rice to key markets, and the benefits of strategic initiatives and acquisitions within the period, I am confident we will see an improvement in operating performance and earnings in FY2022.