Sunrice reports 24% increase in group profits at half year

Australia’s principal rice grower group, SunRice, has announced a good financial result for the first six months to 31 October 2012, with group profits up 24% on the same period last year.

Consolidated revenue for the first half was $519 million, a 7.7 % rise over the same six month period last year. Group profit after tax was $15 million, a 24% increase on the comparable six months.

Ricegrowers Limited, trading as SunRice, is Australia’s leading branded rice food company, with products marketed in close to 60 countries around the globe. SunRice has annual sales of approximately AUD1 billion.

The latest results follow last year’s very successful results.

SunRice CEO Mr. Rob Gordon said the latest results were driven by increased sales volumes in SunRice’s Global Rice Milling and Marketing businesses, as well as a solid first half in the company’s complementary business, CopRice.

“The Australian Rice Milling and Marketing business also performed strongly, with export rice prices holding up well alongside improvements in operational efficiency and productivity. The higher revenues and improved performance demonstrate SunRice’s successful re-entry into many export rice markets, following nearly a decade of drought,” Mr Gordon said.

“The strength of the Australian Rice business also reflects increased efficiencies across the business following the one-off startup costs associated with the reinstatement of two of our rice mills. We have also successfully improved capacity utilization across the supply chain, reduced working capital and gearing,” Mr Gordon added.

Mr Gordon said while the first half has performed ahead of the same period last year, the company remains cautious about the second half. The Medium Grain commodity market prices are expected to soften in the second half which could result in lower selling prices. The challenges our subsidiary Riviana has in achieving price realisation, particularly in retail markets, may also impact our second half performance.”

SunRice Chairman Mr. Gerry Lawson AM said it was the strong first half result in the Australian Rice Milling and Marketing business that underpinned the October increase in the indicative Australian 2012 medium grain paddy price, from $260 per tonne to $280 per tonne.

“Having returned from drought, reinstated two of our regional mills and taken Australian rice back to the world, SunRice is in robust shape,” he said.

Debt reduced

SunRice also reduced its debt by $18 million during the past six months.

The debt now stands at $178 million – much lower than the $303 million declared in May 2011 when the co-operative faced a takeover bid from the Spanish group Ebro Foods.

The takeover bid was rejected by the rice growers of SunRice, and the board has focused considerable effort to reduce debt.

SunRice chairman Gerry Lawson said gearing was now at 53 per cent.

“In line with our expectations and our continued focus on working capital management, gearing continues to improve and at the half year end was 53%. We were delighted to provide our growers with an early and increased payment, reflecting the strength of our global sales, the pricing premium our marketing arrangements afford and continued improvements in operational efficiency, “ Mr Lawson said.

Future competition challenge

The release by SunRice of the latest financial results coincides with criticisms by SunRice’s second largest shareholder and leading rice grower Colin Bell.

Mr Bell was quoted in the financial press saying that deregulating Australia’s rice export market would open up competition and deliver higher prices for Australian growers.

SunRice has a statutory monopoly on buying rice crops grown in the State of New South Wales.

Mr Bell and his associates have been advocating the abolition of the single buying desk .

Mr Bell claimed support of a report by Deloitte Access Economics showing Australian growers were paid less than their counterparts in California.

Mr Bell’s business, Australian Feed and Agriculture Company, is the largest rice producer in Australia.

Mr Bell has also advocated that SunRice be listed on the Australian Securities Exchange.