SunRice profits lift

A positive mix of sales into premium branded markets and solid global prices compensated for lower export volumes after this year's reduced Riverina rice harvest.

Exchange rate movements also eroded international business division earnings, particularly in the Pacific.

However farmer-owned SunRice is bracing for an even smaller crop this summer because of reduced water availability and strong pricing competition for water, forcing the company to "develop contingency plans".

Consolidated revenue for the SunRice Group totalled $642m at October 31, or 5.8pc up on the previous corresponding period a year earlier.

The company's first-half financial results were in line with expectations according to chief executive officer Rob Gordon, who pointed to continued growth of branded sales and operational improvements as underpinning business performance.

Improved profits from the Riviana Foods and CopRice stock feed division had demonstrated the strategies for these businesses were translating into positive financial outcomes.

Despite a "challenging" foreign exchange environment for food imports, Riviana's profitability had reflected a successful turnaround strategy which involved cutting certain product ranges and other cost cutting measures.

"The profitability of the International Rice (including the Trukai and Solrice businesses) and Rice Food business segments was negatively impacted by exchange rate movements and weaker macro-economic conditions in certain markets, such as Papua New Guinea (PNG)," Mr Gordon said.

However, he expected SunRice's overall processing and marketing business to maintain a strong financial performance for the full 2016 financial year, with profits in line with last financial year's results, subject to existing market conditions continuing.

"We continue to actively execute our strategy to focus on premium branded markets and to build capacity and capability across the organisation," he said.

"In this regard, further investments were made in Deniliquin and North Queensland during the half."

The company's gearing level edged down to 61.8pc at the end of the half from 63pc a year ago.

Gearing levels are seasonally influenced by the timing of the annual rice crop harvest and payments to growers.

While revenue for the rice pool business was lower than the same period in 2014-15 because of a smaller harvest last autumn, it benefitted from a favourable sales mix into premium markets and the export competitiveness achieved with the Australian dollar's devaluation.

Conversely international rice business and rice food earnings saw profits decline during the half because of unfavourable exchange rate movements and the need to import additional product.

"In PNG, we continue to monitor how exchange rate movements, potential government policy changes and the overall macroeconomic outlook could impact on the Trukai business," Mr Gordon said.

Meanwhile SunRice's proposal to restructure its capital base will see shareholders receive a restructure booklet in February containing an independent expert's report and detailed information on the advantages and disadvantages of the proposed model.

A series of information roadshows will also provide more details to growers and other shareholders in February and March ahead of the shareholder vote on March 16.