Ravensdown returns 'unacceptable' result
Fertiliser co-operative Ravensdown is offloading loss-making Australian businesses to ensure there is no repeat of a pre-tax profit of $6 million made in the 2012-13 year ending May.
The ''unacceptable'' result is down 88 per cent from $52m the previous year and the co-operative will be unable to pay farmer shareholders a rebate for the first time in 35 years.
Poor performing Australian investments and slower fertiliser sales during the drought contributed to the small profit alongside high urea prices and a consistently high dollar going against the co-operative's policy of hedging long term.
Ravensdown has reacted by selling its stake in its South Australian joint venture, Direct Farm Inputs, and exiting the loss-making Western Australia business. Furthermore, it has changed to shorter hedging closer to the spot market.
Chairman Bill McLeod said it was extremely disappointing for Ravensdown to not pay a rebate in an atypical year for the co-operative.
He said measures had been taken to ensure the rebate-free year would not be repeated.
''This unacceptable result has already prompted decisive action. We have initiated a wide-ranging strategic review with the aim of freeing up capital, reducing risk, improving operating profit and lowering our debt position.''
He said the co-operative was now strongly positioned to keep fertiliser prices competitive, contain costs and to continue investing in nutrient science, research, technology and training into the future.
In contrast, rival Ballance Agri-Nutrients posted a $92.6m profit, up from $77.3m, with a record rebate and dividend of $65 a tonne, up from $44/t, despite sales volumes down 7 per cent to 1.33m tonnes and $878m revenue down from $915m.
Ravensdown's fertiliser sales volumes were back 4.4 per cent to 1.49m tonnes and revenue fell below last year's $1.07 billion to $1.04b.
Chief executive Greg Campbell said recent currency and commodity movements were putting Ravensdown in a solid financial position for the coming year.
He said the Australian operations had not been adding value to the co-operative and would be sold at a likely exit cost of $15m for total losses of $23m.
He said they were in the due diligence period with an interested buyer and an announcement was likely over the next three weeks.
''The New Zealand business is still very solid. This is a bad year and we are still disappointed, but (exiting Australian businesses) sets us up for the future with reduced debt, increased earnings and will reduce the capital we have employed in the business and improve liquidity. They are important things for a business to ensure enhanced value for shareholders.''
Campbell said other competitors were also struggling in Australia.
He said it had to be accepted that Ravensdown had a poor year and Ballance had a great year, but the co-operative was confident it it would turn this around with the changes made.
Ravensdown has already reduced $98m in debt by actions such as reducing fertiliser stock and not replenishing it.
Once the Australian operations are disposed of about $134m in assets will further improve its 54 per cent equity ratio. Net debt was at $248m from last year's $346m.
Adding to a tough year was its nitrification inhibitor product, eco-N, being removed from shelves at a cost of $4m until new international standards are set.
Ravensdown will retain its Queensland operation with sugar cane growers which made record sales this year and is close to a break even point.
- © Fairfax NZ News