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Ravensdown defies dairy downturn

NZN 2/08/2016 Jonathan Underhill

Ravensdown Fertiliser Cooperative has posted a 35 per cent gain in full-year pretax earnings and says fertiliser demand has held up better than expected.

The farmer-owned cooperative reported earnings from continuing businesses before tax and rebates of $62 million in the year ended May 31, up from $46m a year earlier. Sales fell to $660m from $711m a year earlier.

Ravensdown's sales have been in a declining trend for some years, partly in response to falling prices of raw materials such as urea. But the company that supplies almost half New Zealand's agricultural fertiliser has managed to strengthen its balance sheet while investing in new plant and facilities.

It will pay a rebate to farmers of $41 per tonne this year, including $21/tonne in its first-ever interim rebate.

It paid a record $50/tonne rebate in 2015, having recovered from the 2013 year when drought and losses from Australian investments, since sold, led it to miss paying a rebate for the first time in 35 years.

Chairman John Henderson says volumes haven't declined as much as some might have expected in the face of the prolonged downturn in dairy farming, which he attributed to the choices farmers are making on where to cut costs.

"They're moving away from relying on supplements and have gone back to the old tried and true - grass - and they need our nutrients to grow that grass," he said.

Ravensdown's raw material costs, such as imported urea, had dropped markedly, reflecting global fertiliser markets that are currently "a little bit dull", he said.

The company is able to pass on those lower costs to its farmers. It announced a series of price cuts throughout the latest year.

Ravensdown spent $33m on infrastructure in the latest year and said it doesn't need additional capital for its plant upgrade programme. New developments include an import store in New Plymouth which will include a blending plant similar to one recently installed and operating successfully at Hornby.

The company has no net debt. Its operating cash flow was $106m in the latest year, down from $109.7m a year earlier.

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