Lack of sheep drives record profit

Australian flock too small to meet global demands

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.