It's The Margins That Matter
OPINION: It appears to be difficult for people who haven’t tried to run a business to understand the difference between assets and cash.
“Another good financial result”, although down 17.5% from the $63m recorded in 2018, the co-op says.
The profit was impacted by several factors.
“These included foreign exchange movements and higher world commodity prices leading to higher interest and inventory costs. As part of its all year value commitment, prices charged in New Zealand were held at a level that impacted on margins.
“Investment continued in precision mapping and spreading technology, more environmental specialists were recruited and a Holiday Act remediation of $1.3m was set aside.”
The co-op is paying $35m ($30/tonne) in rebates to farmers who bought fertiliser during the financial year, half via an interim payment in June and the rest to be paid in August.
“After five years of consistently profitable results, our shareholders tell us the rebate in any one year is not the be-all and end-all,” said chairman John Henderson.
“What matters to them is a sustainable cooperative that offers great service, quality products, certainty of supply, competitive pricing through the 12 months and ways to help them perform long term.”
For governance purposes and balance sheet strength the co-op is retaining $12m for reinvestment.
Henderson says Ravensdown is spending on services, products and technologies for its shareholders as they face disrupted times.
“We need to invest and innovate to help shareholders reduce their environmental impacts and achieve their production goals.”
Chief executive Greg Campbell said the co-op has to keep a close eye on costs.
“Healthy cooperatives maintain their long term ability to support their owners by being able to retain earnings rather than turn to debt or erode equity.
“Smarter farming requires environmental performance and nutrient management, not maximum fertiliser tonnages or short-term gain.”
Campbell referred to the co-op having this year won awards for “cutting edge effluent technology ClearTech, the progress of our farm environmental consultancy and the HawkEye nutrient mapping tool which puts control in the palm of the farmer’s hands”.
Its IntelliSpread precise aerial fertility scanning and application technology resulted in 18% of customers’ farmed areas not getting fertiliser because they are environmentally sensitive or unproductive.
“We are well positioned to help farmers with their social licence to operate, but these improvements and innovations need long-term investment,” said Campbell.
Fertiliser tonnages were static but sales of the coated urea N-Protect product, which helps reduce the amount of nitrogen lost to the atmosphere, increased by 75%.
And 83% of surveyed customers rated fertiliser product quality as ‘excellent’ or ‘very good’. Quality rating and sales of animal health, agrichemicals and seeds were positive, with seeds having a record year.
“We have already invested over $165m in five years in our physical assets and our stores network is in continued need of renewal. This is important if we can improve service efficiency, product quality and safety,” said Campbell.
“Dust, noise and stormwater issues can all impact on nearby communities and of course the staff who work there. We have spent $10.7m on asbestos removal, stormwater improvements and dust management and there’s much still to do.”
