Shortage of sheep helps boost profits
AGRICULTURAL services group Ruralco has made a record full- year profit, partly because Australia does not have enough sheep.
Ruralco says its rural supplies business benefited over the past year from good rainfall in Victoria, Tasmania, South Australia and southern New South Wales as farmers bought more crop inputs such as fertiliser and weed killer.
High prices for cattle, sheep and wool also boosted earnings.
Posting Ruralco’s results for the year to September, chief executive Travis Dillon said sheep, lamb and wool prices remained high because demand from overseas outstripped supply.
The size of sheep flocks in Australia and New Zealand drove prices, Mr Dillon said.
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.”
Mr Dillon said record wool prices were leading existing wool producers to expand production.
Ruralco’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 the restructuring of its live export and water businesses.
Both restructured units posted earnings growth the past year.
Ruralco’s underlying profit, which excludes one- off items, rose 95 per cent to $ 26.2 million, while revenue was up 2 per cent at $ 1.83 billion.
Its bottom line was also boosted by an increase in real estate volumes and acquisitions that added to the size and geographical reach of Ruralco’s business.
Mr Dillon said he was pleased Ruralco’s core traditional businesses had delivered strong organic growth, and that there had been a positive turnaround in live export and water retail sales.
Ruralco said good rain 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, though 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.
Mr Dillon said Ruralco would focus over the next year on delivering the targeted earnings contributions from the portfolio of acquisitions completed this year.
The company is paying a final dividend of 6c, fully franked, up from 2c a year ago.