National processor and marketer, SunRice, is tentatively tipping a lift in its next full-year net profit to around $40 million (after tax), as re-charged US crop prices boost Australian export prospects.
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The grower-owned rice business is hoping for a continued global price revival from recent decade-lows for the rest of its 2017-18 season, which ends next April.
SunRice Group’s various divisions have generally performed strongly since May, including the company’s troubled Papua New Guinea partnership, Trukai, and its stockfeed business CopRice.
Local and overseas improvements
Shareholders at the company’s Friday annual general meeting at Jerilderie were told CopRice had benefitted as a gradual recovery in dairy industry earnings prompted increased spending on supplementary feeding.
Last year it reported an after-tax profit of $34.2m, largely because of a big 41pc slide in its rice pool earnings, resulting in a $32.5m trading loss for the pool.
SunRice managing director, Rob Gordon, said while 2016-17 was characterised by a challenging trading environment, current signals indicated rice markets were moving beyond the bottom of the cycle.
In particular, supply shortages in the Californian market, where SunRice also owns the SunFoods processing business, had been largely responsible for a kick in medium grain rice prices.
California’s medium grain cash paddy price had jumped 40 per cent since March.
October’s tender prices from the Japanese market were expected to open at about $US745 a tonne - up from March’s $US530/t.
Based on those estimates, growers were told SunRice was confident of paying a total $320/t to $360/t for the crop harvested in autumn this year, but market trends would need to continue in the company’s favour for the upper-end of this range to be realised.
Key market conditions and factors to watch would be global rice production movements and exchange rate movements, in particular the health of the PNG kina, which devalued considerably in the past year, deflating SunRice returns in Australia and reflecting tough conditions in the New Guinea economy.
“In line with SunRice’s strategy to encourage our growers to improve returns through planting higher value varieties, we have announced attractive fixed price contracts for next year’s crop for varieties such as Koshihikari ($520/tonne), Doongara ($450/tonne) and Reiziq ($360/tonne),” Mr Gordon said.
Last season SunRice offered a $415/t forward contract price to tempt growers to plant reiziq, although the big price it came at a cost to the pool business which only generated $280m in revenue after water-constraints discouraged many farmers from planting at all.
Meanwhile, the SunRice board’s plans for a potential partial float of the company on the Australian Securities Exchange are staying on the backburner.
Shareholders have been told the time was not yet considered right to push ahead with a decision on the capital restructure strategy developed by Macquarie Bank.
Macquarie was also a key advisor in a similar capital restructure plan for Murray Goulburn dairy co-operative which turned sour for outside investors in the dual class listing last year.
Andrew Marshall
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
