Last season’s bigger crop has helped lift SunRice’s after-tax net profit almost 16 per cent to $24.1 million for the first six months of its 2017-18 trading year, despite less consolidated revenue.
Revenue dipped 4.1 per cent on the same period last year to $544.9m.
With international rice market prospects looking better and its focus on selling branded Australian-grown products at premium values reaping rewards, SunRice tips its full-year profits will lift towards $45m, up from a previous $40m forecast.
A larger Riverina rice crop of 802,000 paddy tonnes harvested in autumn, plus helpful foreign exchange gains and the gradual improvement in SunRice’s biggest overseas business, Papua New Guinea’s Trukai, all contributed to the first half profit rise.
Better results from the CopRice stockfeed business and food service and catering products division, Riviana Foods, also helped offset the company’s continued trading challenges in several key overseas markets.
“We expect the improved quality and diversity of earnings will flow through into full year results, especially given current market trends,” said chief executive officer, Rob Gordon.
“SunRice has built a commercially resilient and diversified business able to both withstand challenging trading conditions (as demonstrated in FY17) and quickly recover when markets improve.”
For the coming harvest season estimated paddy prices for base grade medium grain (Reiziq) have lifted to between $335 a tonne to $365/t – up from $300 to $320/t.
Continuing positive price movement in global markets, coupled with SunRice’s ongoing strategy of placing Australian rice in higher returning markets and securing rice from alternative international supply chains, had supported a positive 2017 crop earnings trend in the past six months.
Mr Gordon said while SunRice hoped positive global market trends would continue, any softening in prices and a further strengthening of the Australia dollar would hurt.
However, he said the first half financial results did not fully reflect “the improved quality and diversity of SunRice’s earnings”.
A strategy of exporting Australian rice to premium markets and securing alternative sources of rice beyond the Riverina had developed the company’s international trading activity into an important pillar of the business, generating increased earnings.
Meanwhile, several business segments which traditionally experience seasonal trading uplifts during the second half and tender markets were also anticipated to drive volume expansion during the remainder of 2017-18.
The larger 2017 Riverina crop had resulted in a 21pc lift in SunRice’s pool revenue, and net profit before tax jumped 33pc against the same period in 2016-17.
Rice pool result
Rice pool revenue responded to the farmer-owned company’s ability to once again place the southern NSW crop into key premium markets where SunRice brands command strong prices.
Manufacturing efficiency improvements and favourable milling yield also contributed to a positive start to the year.
Due to the larger Australian crop, there was less requirement to source from international supply chains which subsequently meant the international rice business net profit before tax declined 11.2pc.
Trukai leveraged its in-market brand strength and optimised its product mix to generate positive pre-tax profit growth, despite weak trading conditions in New Guinea.
In California, SunFoods’ performance was impacted by lower volumes (due to the larger Australian crop) and the increasing cost of paddy rice in the US market.
SunFoods’ participation in market tender processes is expected to bolster revenues for the business during the second half of of the trading year.
Sales volumes and revenues remained relatively flat in SunRice’s local food markets, with pre-tax net profit down to $1.5m.
The rice flour segment experienced competition from Vietnamese imports.
However, the microwave rice category continued to grow its dominant presence and now generates almost half of this segment’s sales revenue.
The recent introduction of new Adult Mini Cakes is anticipated to underpin sales revenue growth in the snacking category.
Riviana’s net profit before tax grew 9.4pc with help from SunRice’s ownership of the Felhbergs business for a full six months, but challenging trading conditions in the food service sector and restructure costs impacted on the Riviana result.
A sales uplift is expected during the Christmas and Easter festive seasons.
CopRice posted a turnaround of $4m in pre-tax profits having posted a loss before tax of $1.5m a year ago.
Positive pricing mix and margin growth in speciality and grocery segments drove the improved performance, while dairy and sheep feed segments expect a seasonal uplift during summer.