Ruralco is retrenching staff, considering branch closures and restructuring its Total Eden water business and live export subsidiary, Frontier International Agri (FIA).
The farm services company has also significantly downgraded profit expectations for its full 2015-16 trading year.
In the wake of the cancellation of its southern live export licence Ruralco has this morning closed FIA’s Melbourne office and terminated all activities and staff associated with the southern livestock business.
The FIA move is estimated to cost between $3 million and $5m at the end of what parent company Ruralco Holdings has also acknowledged has been a year of difficult trading conditions in some key areas.
The group is now forecasting its net profit after tax to be slashed by between $2m and $5m for the trading year.
Underlying earnings before interest, tax, depreciation and amortisation are expected to fall in the range of $40m to $44m for the full year to September 30 after tough trading conditions in areas where Ruralco Holdings’ fully owned businesses and joint ventures have strong market share.
In a wider cost-cutting and efficiency drive, the company is also reviewing non-core assets and looking at rationalising its rural stock and station agency branch numbers.
Ruralco Holdings has also confirmed it will rack up a further $4m to $5m in restructuring costs now being implemented in its relatively new Total Eden water equipment retail and farm advisory business.
The FIA restructure has included appointing Frontier International’s chief financial officer, Will McEwin, as managing director of the company’s continuing northern business which exports cattle to Indonesia and Vietnam.
A company announcement to the Australian Securities Exchange (ASX) noted Mr McEwin had significant experience within agribusiness extending across senior management positions within Australia and internationally.
He had a strong understanding of strategy, business performance improvement and process development.
Another appointment shuffle earlier in the year saw Peter Weaver made executive general manager of Ruralco’s Total Eden water business where he is now also instituting rationalisation strategies.
Mr Weaver has completed a review of the Total Eden business and is “advanced in a number of restructuring initiatives aimed at delivering improved operating performance”, the company said.
While recent good rain across much of rural Australia was expected to provide a solid business base for the upcoming spring, the major restructuring effort and strategic initiatives in the live export and water retail divisions were likely to cost Ruralco a further $3m to $5m in pre-tax costs which would be booked as a non-recurring charge to the 2015-16 financial results.
“The board and management remain confident the Group’s diversified business streams and geographical network position it well for the future,” the company said.
In particular, the group was confident its strategy of expanding its market-leading position in water services via its integrated retail network, infrastructure services and water broking division would deliver a significant point of difference and enhance group operating results.
Ruralco will report its full year results and provide more details of its restructuring activities and savings on November 15.