Ravensdown posts 18% drop in FY earnings as it cuts prices, invests for future growth
By Tina Morrison
Aug. 7 (BusinessDesk) - Ravensdown, the fertiliser cooperative owned by farmers, posted an 18 percent drop in annual earnings after it reduced prices to gain market share and invested in infrastructure to drive future growth.
Earnings from continuing businesses before tax and rebates fell to $51 million in the year ended May 31, from $62 million a year earlier, according to the Christchurch-based company's latest accounts. Sales volumes increased 2 percent as Ravensdown gained new customers, but revenue fell 5 percent to $627 million due to price reductions, it said.
Ravensdown, which competes with rival cooperative Ballance Agri-Nutrients, invested $42 million in infrastructure over the past year, including new loaders, conveyors, roofing, laboratories and high precision blending machinery, taking its total infrastructure investment to more than $100 million over the past three years. It also shelled out $5 million for new technology and $4 million to support research and development.
"Strong years in 2015 and 2016 meant at the start of the last financial year, we were able to set ambitious targets to invest in infrastructure, to improve market share and to develop new technology," chair John Henderson said.
The cooperative noted that its fastest growing service was its environmental consultancy, which helps farmers to mitigate their impacts and work with regulatory frameworks.
Ravensdown will pay an annual rebate to farmers of $45 per tonne, ahead of $41/tonne the previous year. Farmers who bought fertiliser before the financial year end of May 31 received a $20/tonne rebate on June 9, and the remaining $25/tonne will be paid to fully paid-up shareholders this month, it said. 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 to its farmer shareholders for the first time in 35 years.
Last month, Mount Maunganui-based Ballance Agri-Nutrients reported that its gross trading result, a measure of profit including operating costs, rebounded to $56.8 million after falling to $35.1 million a year earlier when cash-strapped farmers spent less on fertiliser and it was hurt by a trading loss at its Kapuni ammonia urea plant. The Kapuni plant returned to full production over the last year, and produced a record 277,000 tonnes, ahead of its historical average of 260,000 tonnes.
Its revenue dipped 4 percent to $805 million, as the average revenue per tonne declined and fertiliser sales volumes fell 1 percent, however, chief executive Mark Wynne said it was selling more higher margin products which have a better environmental performance.
Ballance also declared a $45/tonne rebate to farmers.