Wednesday, 5 August 2020

Resilient Ravensdown responds with strong $69m profit - returning $68 million to farming


After ensuring essential food-creating nutrients kept flowing during the pandemic, Ravensdown has recorded a profit from continuing operations and before tax, rebate and an earlier issue of bonus shares of $69 million (2019: $52m).

Returning a total of $68 million to its eligible farmer shareholders, the co-operative is confident in its financial strength and cautiously optimistic in the face of uncertainty around Covid-19 and emerging government policy.

“The resilience demonstrated was no accident, but deliberately built over five years of steadfast focus on fundamentals and performance. It meant that we could respond when shareholders needed us most and when New Zealand needed the agsector most,” said CEO Greg Campbell.

In addition to a previous non-cash bonus share distribution in March worth $40 million including imputation credits and a further rebate of $25 per tonne of fertiliser purchased in 2019-20, Ravensdown was able to increase spending on its physical infrastructure to $28 million and repeat its 2018-19 spend on R&D ($5 million). Reduced inventory and strong cashflows throughout lockdown meant that Ravensdown finished the financial year with no net debt, money in the bank and operating cashflow of $143m.

With nutrient supply deemed an essential service during Covid-19 lockdown and farmers attempting to catch up after a severe drought, the year ended strongly. Greg puts the strong result down to resolute support from shareholders, a dependable supply chain, a proactive approach to cost reduction and an outstanding effort from all staff.   

“The food creators of Aotearoa deserve all New Zealanders’ thanks. Even though Ravensdown is performing consistently, the co-operative must remain prudent in order to help the farmers of the future,” added Greg. 

“We’ve got to keep scrutinising our costs, focus on maintaining product availability, upgrading our network of physical assets and keeping prices competitive. Just as farmers are budgeting with caution, we are seeing substantial uncertainty ahead as recession bites, commodity prices remain volatile and a Covid resurgence threatens.” For example, the number of full-time employees remained stable and, in 2020-21, there is also a hold on any additional headcount.

“Such a consistent performance across five years has real value in a world that has seen such dramatic changes of fortune,” said Ravensdown’s Chair John Henderson. “The value of the company has risen over the past years thanks to prudent management and the building of reserves. In March, an additional and totally separate bonus share issue was made to shareholders who have purchased over the prior three years. This rewards shareholder loyalty and puts some of the accumulated value in their hands.”

Adoption of the HawkEye mapping tool that can help with nutrient decision making and demonstrating compliance leapt up by 23%. The co-operative believes the ability to capture fertiliser proof of placement data will be increasingly important and thanks to the past and ongoing investment in this technology, shareholders can be ready for this requirement. Cross-sector collaboration continued with TracMap on groundspreading technology and with Fonterra, LIC and others on operational and environmental management.  

Hours of environmental consultancy delivered to farmers increased by 29% - another trend expected to increase as government regulation starts to mandate Farm Environment Plans. While precision aerial spreading is still in its infancy, the technology was applied to 152,765 hectares of land: an increase of 40% on last year. 

“Our role is to assist shareholders to adjust to changing regulations at central and regional government level with solutions that adapt to these signals while protecting production,” said Greg. “Smarter farming is about optimising productive food-creation systems and their environmental impacts. Our certified teams have been out there recommending good management practices and the focus is always on the ‘Four Rs:’ right place, right time, right amount, right product.  In conjunction, products like Serpentine Super can help reduce risk of phosphate run off. Coated urea like N-Protect, which saw a record year, helps cut farmers’ greenhouse gas emissions.”

In terms of its own footprint, Ravensdown’s own core emissions reduced by 5.3% and is on course for its target is a 15% reduction by 2030.

After a drought-enforced break from fertiliser application, farmers ‘caught up’ as they focused on generating enough feed in the autumn for the immediate needs of their livestock and to try and prepare for spring recovery. “The manufacturing, stores and spreading teams pulled out all the stops and did a magnificent job operating throughout the Covid-19 lockdown,” said Greg.

“Covid-19 reminded everyone how essential food needs essential fertiliser,” concluded John Henderson. “Ravensdown’s role as the farm nutrient and environmental experts has never been more relevant. There’s a lot of pride in Ravensdown’s contribution to New Zealand’s recovery and I’d like to thank all the team for their massive effort under challenging circumstances.”

The year at a glance 2019-20:  numbers for 2018-19 in brackets

  • Profit from continuing operations before tax, bonus share issue and rebate: $69 million ($52 million).

  • Operating cashflow: $143 million ($31 million). Equity ratios: 77% (74%) before rebate and 74% after rebate (70%).
  • Rebate of $25 per tonne to be paid in cash by the end of August for fully paid-up shareholders.
  • Revenue: $750 million ($749 million).

  • $28 million ($27 million) invested in infrastructure including stormwater improvements, conveyors, roofing and laboratories.

  • $5 million invested in new technology ($6 million) and $5 million ($5 million) supporting R&D.