RURALCO's water interests have shown plenty of potential as the company this week posted a $5.1 million net profit after tax, overcoming the dry start to its 2013-14 trading year.
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Led by solid growth in its farm supplies market and improved cost management across its branch sites, the profit result is a notable recovery from the $500,000 loss reported this time last year.
Sales revenue lifted 14 per cent to $544.6m and underlying earnings before interest, tax, depreciation and amortisation (EBITDA) were up 34pc on the same time in 2013 to $22m.
The increasingly diverse national farm services player will pay a fully franked interim dividend of eight cents a share.
Managing director John Maher said business profits and volumes had continued to trend positively despite dry and hot seasonal conditions in the first four months of the period.
In fact, the dry summer had generated extra returns from the company's strategic investments in water trading and equipment supplies.
Water broking gross profits jumped 150pc ($700,000) after poor summer rainfall and improved price prospects for commodities such as milk, rice, and cotton encouraged irrigation water buying activity.
A 50pc jump in the volume of water traded by investors and irrigators, including horticulture producers, pushed water prices from an average $27 a megalitre in southern NSW and Victoria in March 2013 to peaks around $80/ML in January and $73/ML by the end of Ruralco's half-year.
"It is pleasing to see our strategy of diversifying and extending the revenue base to provide some protection against volatility in seasonal conditions and commodity prices working to our advantage," Mr Maher said.
Chairman Richard England said the company was transitioning beyond the tough trading conditions experienced last financial year.
Factors contributing to the 57pc lift in net profit after tax included a 19pc rise in rural supplies gross profit, despite poor dryland cropping conditions in spring and summer.
Late autumn rain, especially in southern regions and extra market share achieved by new store sites helped improve farm supplies sales across all product categories.
Livestock gross profits leapt 31pc on the results for the 2012-13 first half - despite livestock prices averaging about 20pc less than their 2011 peak - with cattle sales throughput up 41pc and sheep numbers up 12pc.
Although drought had contributed to the increased sale volumes handled by Ruralco agents in Queensland and northern NSW, Mr Maher said nationally throughput had lifted in quality, as had demand from domestic and export markets.
International demand for Australia's meat and other soft commodities continued to positively effect all segments of the business, which was targeting underlying profitability results similar to the range reported in the past two years.
He said signs were encouraging for Ruralco to enjoy solid trading conditions for the second half, with South Australia, Victoria and Western Australia enjoying a good start to the winter cropping season.