$30 million cash injection from Ballance rebate

We are distributing a total of $30 million to farmers this week, returning 87 percent of our 2015/16 $35 million gross trading result to shareholders.

July 27, 2016

$30 million cash injection from Ballance rebate

Results at a glance

  • Total distribution to shareholders of $30 million ($76 million last year)
  • Rebate payment of $25 per tonne ($55.83 last year)
  • Total revenue of $837 million ($893 million last year)
  • Gross trading result of $35 million ($81 million last year)
  • Total sales volumes of 1.62 million tonnes (1.75 million last year)
  • Equity ratio of 81% (80.4% last year)

 

We are distributing a total of $30 million to farmers this week, returning 87 percent of our 2015/16 $35 million gross trading result to shareholders.

On 29 July Ballance will begin making rebate payments averaging $25 per tonne. Returns to shareholders vary with volumes and products purchased, but a shareholder buying 100 tonnes could expect to receive $2,500. Ballance will pay no dividend following a Board decision to acknowledge the loyalty of transacting shareholders through profit distributions.

Chairman David Peacocke said in recognition of tight farm budgets Ballance made the call to keep prices as low as possible, operating with lower profit margins throughout the year to support farmers looking to make the most of home-grown feed. Current nutrient prices are the lowest they have been for many years.

“We bought competitively and passed savings on to our shareholders, effectively giving them an early rebate.”

Mr Peacocke said that given tight farm budgets, the co-operative was unlikely to match its strong performance of previous years. However the main driver behind the rebate not being higher was an unforeseen trading loss recorded by the co-operative’s Kapuni ammonia urea plant.

“The Kapuni loss eroded what was a steady performance despite the difficult conditions. Kapuni has contributed positively to our trading results for many years, supporting us to deliver superior rebates to our shareholders. We hit a bump in the road this year and we expect to deliver more returns for our shareholders again next year. We’ve had a long history of success.”

CEO Mark Wynne said a catalytic converter break down at Kapuni near the start of the year led to lost profits and capital costs totalling $13 million. The break down meant that the plant was running at around 75 percent of normal production levels for most of the year. Cost recovery options are being explored.

“As you can imagine, a plant of this nature is incredibly complex. The repair required specialised replacement parts, custom-made in Europe, with a lead time of nine months from manufacture to installation. We simply couldn’t fix it any faster.”

Ballance is continuing to explore partnership options for a complete redevelopment of the Kapuni plant – the only one of its kind in New Zealand. A partial plant upgrade has been ruled out, reflected in a $5.5 million write-down for exploratory work.

“The plant is 30 years old and still ticks along nicely with regular maintenance, but she’s not as efficient as modern models. We’re looking very seriously at how we can continue to provide a sustainable supply which is globally competitive.”

Mr Wynne said the co-operative’s balance sheet remained very strong as a result of continued financial discipline, reflected in an equity ratio of 81 percent compared to last year’s 80.4 percent. Despite a tough year, the co-operative was sound, farming was a long game and a long-term perspective was important in agribusiness.

“Farmers want value beyond the rebate. We are making the best use of our knowledge of farming systems to help unlock farm potential and increase profits on farm in good years and the not-so-good. That includes continuing to build a strong portfolio of products best suited to local farming systems to lift production, and minimising nutrient losses through precision farming tools. This combination of competitive price, expert advice, smart products and precision technology ensures a sustainable co-op which can partner with our shareholders and customers over the long term.”

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