SunRice toughens up for ASX float

Nor is he stressing about the consequences of a low dollar on trading earnings just when the company may have to buy quite a lot of extra grain overseas.

"The current seasonal situation supports and endorses the need for a capital restructure to improve the flexibility of the SunRice business," said Mr Gordon.

"We are already proving ourselves to be a very resilient business which is prepared for different levels of the crop cycle and variable business conditions in overseas markets."

Low rainfall, historically low water inflows in the Murrumbidgee and Murray Valley irrigation area catchments, and aggressive pricing competition for water for other crops, including cotton and nuts, have cut the 2015-16 rice crop's anticipated size to about 300,000 tonnes.

That's well below SunRice's annual domestic and export market for at least 1 million tonnes, almost all of which would be grown in Australia in a typical season 15 to 20 years ago.

Shareholders in farmer-owned SunRice will vote on March 16 on a proposed capital restructure plan which would allow investors from outside the industry to buy shares in a SunRice Trust listed on the Australian Securities Exchange (ASX).

The restructure, similar to the Murray Goulburn dairy co-operative's share scheme listed this year, aims to let growers and others trade their B-class shares in a more open and competitive market than the National Stock Exchange where the company is currently listed.

The ASX would also offer SunRice a more liquid market in which to raise extra capital by listing additional trust shares should it need the cash to make new investments or upgrade current operations.

Mr Gordon said despite foreign exchange trends moving against SunRice in the past two years the company had lifted its after-tax profit 47 per cent in 2014-15 and made further profit gains in the first half of 2015-16.

"We think this is a good insight for potential investors looking at the company's ability to deal with difficult conditions.

"It's a particularly appropriate time to have people outside the industry judging our capabilities."

Mr Gordon said although shareholders were still to vote on whether to go ahead with the carefully developed restructure plan, which would keep grower control of the board and the business, directors had detected widespread support for improving SunRice's business flexibility.

"Volatility is also increasing in international market trends, so we need to be thinking ahead about how to flex to meet those conditions," he said.

"Current water availability and markets have shown the need for us to be a more dynamic business."

He emphasised any vote to list a capital trust on the ASX was not a vote to raise extra capital from new investors at this time, but to have the option for such a capital raising available at a later date.

SunRice chairman Laurie Arthur said the capital restructure would "change the way we fund SunRice's future growth" and build an Australian-controlled food company of scale to compete in global markets, benefiting all growers and shareholders.

"The restructure process had been comprehensive, with significant time and resources invested in it to deliver enduring grower shareholder control," he said.

Trading shares openly on the ASX would potentially unlock greater value for B-class shareholders, given comparative trading multiples were higher for ASX-listed stocks than those on the NXS.

A restructure information booklet will be sent to all shareholders in February, including an independent expert's report and details on the advantages and disadvantages of the proposed restructure model.

A series of information roadshows for shareholders will also run in February and March.