SunRice is flagging an extended delay for a shareholder vote on plans to list a Murray Goulburn-styled investor trust on the stock market.
A shareholder vote was originally expected in January, then postponed until after the rice harvest, but now a date is not clear.
The grower-owned rice processor and marketer has, however, been quick to refute any suggestions the emergence of Murray Goulburn’s (MG) financial difficulties have prompted SunRice to re-think the capital restructure model its board has championed for almost 12 months.
Rather, it has pointed to “recent developments regarding one of its joint venture partners” who want to review the business relationship prior to any capital restructure.
SunRice has joint venture processing operations in Papua New Guinea, the Middle East and the US.
Trading results from its PNG business are likely to face turbulent times because of the sliding value of the local currency and changing government policy on imported food.
In July last year dairy co-operative MG raised $500 million from its newly launched a capital unit trust, which gave Australia’s biggest dairy business access to Australian Securities Exchange (ASX) investors outside its co-op structure.
However last week it said it expected a net profit after tax as low as $39m for the financial year - down from last year’s prospectus forecast of almost $90m - leaving its share market investors sorely disappointed.
Managing director, Gary Helou, who headed SunRice before moving to MG five years ago, has resigned in the wake of the profit slump.
SunRice’s own capital structure proposal has been developed along the same lines as the MG trust, using many of the same market advisory services.
However SunRice chairman, Laurie Arthur said the company’s restructure timeline was “not being impacted on by recent media commentary about companies with similar capital restructures”.
Nor were operational or financial performance issues a contributing factor.
“Indeed, maintenance of our guidance on anticipated for our 2015-16 financial results indicates the business has continued to perform well since January 2016,” he said.
“Let there be no doubt – directors remain fully committed to the proposed capital restructure.
“But it will only be brought before shareholders for consideration when it can deliver on every element and has been through all the necessary processes, including completion of the joint venture partner’s review of SunRice-specific arrangements.”
The joint venture partner had only recently decided the proposed capital restructure justified its own review of the venture arrangements.
Given the unknown outcome and timing of this review, SunRice management could not provide a definitive timetable for a vote on the restructure plan at this point.
A company statement said the capital restructure continued to have strong support from both A- and B-class shareholders.
“SunRice expects to maintain strong financial performance in FY16 and, profit is anticipated to be in line with the previous year’s result, subject to completion of the full year audit.
“For the past 11 years since converting to a public company in 2005 and then listing on the NSX in 2007, SunRice has demonstrated an ability to balance the needs of both classes of shareholders within its unique structure.
“Between FY11 and FY15, B Class Shareholders experienced an increase in earnings per share of 239 per cent and dividend appreciation of 72pc.
“For A-class shareholders (growers), between the 2011 and 2016 crop years SunRice has been able to lift the price it has paid for medium grain paddy (Reiziq) by almost 63pc.”
The company said its continued strong financial performance is especially pleasing given the challenging trading environment and market conditions experienced during the second half of FY16.
Consumer market sales across both domestic and international operations were particular highlights.
However SunRice was closely monitoring issues in PNG, such as exchange rate movements, potential government policy changes and the overall macroeconomic outlook.
The tightening of PNG kina’s liquidity had “potential to materially impact on SunRice’s business in Papua New Guinea during FY17”.
