Lack of sheep drives record profit

Aus­tralian flock too small to meet global de­mands

Mercury (Hobart) - - BUSINESS - TREVOR CHAPPELL

RURALCO has made a record full-year profit, partly be­cause Aus­tralia does not have enough sheep.

The agri­cul­tural ser­vices group said its ru­ral sup­plies busi­ness had ben­e­fited from good rain­fall in Vic­to­ria, Tas­ma­nia, South Aus­tralia and south­ern NSW as farm­ers bought more crop in­puts such as fer­tiliser and weed killer. High prices for cat­tle, sheep and wool also lifted earn­ings.

Post­ing Ruralco’s re­sults for the year to Septem­ber, chief ex­ec­u­tive Travis Dil­lon said sheep, lamb and wool prices were high be­cause over­seas de­mand out­stripped sup­ply.

The size of sheep flocks in Aus­tralia and New Zealand drove prices.

Sheep and lamb are ex­ported all over the world but most of the wool goes to China.

Mr Dil­lon said global wool stocks were not suf­fi­cient to meet de­mand. “That’s driv­ing the de­mand for Aus­tralian prod­ucts,” he said. “There’s not enough sheep — the Aus­tralian flock of sheep is tens of mil­lions of head down on what it was in its peak.

“It goes back to the dereg­u­la­tion of the wool price. The sheep flock in Aus­tralia has been de­plet­ing for decades.”

Record wool prices were lead­ing ex­ist­ing wool pro­duc­ers to ex­pand pro­duc­tion.

The com­pany’s net profit of $22.4 mil­lion for the year to Septem­ber rose from $4.3 mil­lion in the pre­vi­ous year, when the bot­tom line was weighed down by re­struc­tur­ing its live ex­port and wa­ter busi­nesses.

Both re­struc­tured units posted earn­ings growth in the past year.

Ruralco’s un­der­ly­ing profit, which ex­cludes one-off items, rose 95 per cent to $26.2 mil­lion, while rev­enue rose 2 per cent to $1.83 bil­lion.

Its bot­tom line was also boosted by an in­crease in real es­tate vol­umes and ac­qui­si­tions that added to its size and ge­o­graph­i­cal reach.

Ruralco said good rain­fall in the east­ern states in Septem­ber and early last month should sup­port sales of ru­ral sup­plies over the next few months.

Cat­tle prices are ex­pected to ease, re­turn­ing to his­tor­i­cally av­er­age prices al­though, in the short term, prices are ex­pected to be largely in­flu­enced by sea­sonal con­di­tions.

The medium-term out­look for wool, sheep and lambs was pos­i­tive, the group said.

Ruralco shares closed up 0.35 per cent at $2.90.

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