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Mid-Cap

SunRice, the rice processor’s course to growth path

June 27, 2016 | Team Kalkine
SunRice, the rice processor’s course to growth path

 
While there have been a lot of speculations at the back recent troubles at dairy cooperative Murray Goulbourn, SunRice has reported itself to be on growth track while seeking options to raise capital. The company reported strong financial results for the twelve months ended April 2016 with consolidated revenue up 1.9% year-on-year of $ 1.3 billion, net profit after tax up 5.8% year-on-year to $ 52 million, fully franked dividend of 33 cents per B class share up 6.5% year-on-year and final C 15 full-year paddy price of $ 404 per tonne up 2.3% year on year. The increase in consolidated revenue over the previous year was driven by a continuing favourable mix of sales in premium brand markets and price as well as robust growth from the International Rice and Rice Food business segments. The increase in net profit over the previous year was because of strong operational performance though partly offset by movements in exchange rates.
 
CEO Rob Gordon said that the results clearly demonstrate that increased revenues scale and profitability experienced in FY 2015 have been achieved because of the strategy implemented in FY 2012. The strategy, focusing on premium branded markets and building capacity and capability across the organisation, has increased resilience of the group in operating environment which is dynamic and challenging. Performance was good across a range of markets was the Middle East, Asia and Australia and New Zealand business segments reporting positive market share and volume results. The company has intensified initiatives in global sourcing as a result of the lower rice harvest volumes in the Riverina. The new International supply arrangements resulted in approximately 300,000 t of rice been sourced from Asia and USA, which allowed the company to service and maintain the expanding branded markets. The capital expenditure incurred during FY 2016 of $ 24 million was largely focused on improvements on processes to enhance production yields and quality.
 
The C15 paddy price for medium grain grows to: $ 404/tonne in FY 2016, from $ 395/tonne in FY 2015 depicting a growth of 2.3% or so. EPS increased by 13% from 77.9 cents per share to 88 cents per share and dividend by 6.5% from 31 cents per share to 33 cents per share. The year-end gearing (debt to debt plus equity) increased by 130 basis points from 30.5% to 31.8%, while the return on capital employed fell by 70 basis points from 15.8% to 15.1%. The increase in gearing was because of higher net working capital, including higher international inventory levels and lower payables because of the smaller crop harvest in 2016. The final paddy prices for C15 will be $ 404 per tonne for medium grain (Reiziq), an increase of 2.3% year-on-year; and $ 534 per tonne for Koshihikari, an increase of 1.7% year-on-year. The fully franked dividend of 33 cents per share for B class shareholders is an increase of 6.5% over the previous year and works to a dividend payout ratio of 38% and a dividend yield of 7.7%. The company also highlighted that Riverina building and packaging operations were revamped during FY 2016 in anticipation of the lower crop harvest in 2016. During the process, the group continued to be focused on ensuring the viability of the Deniliquin and Leeton operations for future.
 
Based on the past performance, the leadership efforts from Gordon have paid off for the company, which has witnessed a rise in net profit from $22.7 million to $52 million, paddy price from $275 a tonne to $403.60 a tonne and net tangible assets from $5.12 to $6.84, in last five years. This comes at the back of appropriate investment in marketing, manufacturing capability and product development with company’s commitment towards capital restructure for striving for growth, managing risk and ensuring greater resilience.

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