Urea plant faces forced closure over gas supply
One of New Zealand’s largest fertiliser plants could be forced to shut down for four months as uncertainty looms over gas supply.
The writedown has pushed the farmer-owned business from underlying earnings before tax of $38m to a net loss of $49m for the 2025 financial year.
Chief executive Kelvin Wickham says the gas supply-related writedown of the Kapuni plant has taken the gloss off what was a strong underlying annual performance.
Wickham says that the co-op delivered strong results in challenging circumstances.
"We were very happy with our performance - we reduced our debt and our revenue was up, but the gas situation has taken away some of the gloss," he told Rural News. "We've taken a hit on our balance sheet and moved on."
The co-op's revenue rose 4% to $965m and it finished the year with cashflows of $136m and debt reduced by $78m.
Earlier this month, Ballance announced that it would close the Kapuni plant for four months if a gas supply agreement wasn't reached in the coming months.
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Wickham says talks are ongoing with gas suppliers to continue operating Kapuni until the new year, but nothing has been finalised.
Kapuni needs gas to operate and with future gas supply in doubt, the Ballance board decided to write down the full value of the plant.
Wickham says Kapuni has nil value on the co-op's balance sheet.
"The board believes that this is the prudent approach," he says.
Ballance chair Duncan Coull says the board is taking "a cautious approach in writing down the Kapuni plant asset given the uncertainty over future gas supply agreements".
"Although disappointing, it's the approprate thing to do. Our strong balance sheet, shareholder equity and reduced debt mean we've been able to absorb this one-off writedown, which is reflected by our nominal share value remaining unchanged at $9 per share. Most importantly, the business remains in a strong position to continue to deliver affordable and reliable nutrients for farmers and growers.
"Despite challenges during the past year, with global commodity price increases and uncertain New Zealand gas supply, our core business continued to perform well. This meant we could partially protect our farmers and growers from global price increases and show the strength and resilience of our co-operative."
Continuing its focus on prudent financial management, the Ballance board made the necessary decision to not pay a rebate, for a third year in a row.
Wickham says the co-operative is well positioned for the year ahead and beyond.
"Once again, we've delivered strong results in challenging circumstances. With this year already off to an excellent start and with improved farmer confidence we're firmly focused on what lies ahead.
"Led by our refreshed strategy, we're gearing up to support farmers' changing needs. I want farmers and growers to know that we are right there with them - we are all in for the future of farming and we want them to succeed."
