Ruralco eyes more farm sector growth

After a growth spurt of acquisitions and joint venture deals, Ruralco has established nationally as one of the three big names in the rural supplies and agency game.

More acquisitions and new greenfield opportunities are in the pipeline says managing director, Travis Dillon, who was appointed to the top job late last year.

In particular, the company’s sights are set on becoming far more active in the water equipment sector and having a greater hands-on role in the “protein supply chain” serving Australia’s fast evolving food markets in Asia.

The suite of joint venture and fully owned businesses under Ruralco’s banner range from Territory Rural in northern Australia to Farmworks and The Farm Shop in Western Australia and Queensland Rural, Dairy Livestock Services and Rodwells in the east.

While key rivals Elders and Landmark have been keenly focused on streamlining their operations, repaying debt and holding ground in a fiercely competitive trading environment, their new opponent has built a diverse footprint since it emerged in 2006 as a growth-hungry junior quietly seeking partners and acquisitions.

Ruralco’s market capitalisation value has grown sixfold to about $280 million and it enjoys one of the lowest debt to equity levels in the sector - about 21 per cent.

Sales revenue topped $1.8 billion last financial year - up 18pc on the previous year.

Ruralco Holdings’ now encompasses a burgeoning irrigation equipment sales and advisory business, water and grain trading, livestock export shipping, farm finance and insurance and a host of traditional stock and station agency roles.

It is also the name behind the big CRT rural merchandise network, supplying product to about 500 CRT businesses (some of which it owns outright).

“When Ruralco started we had the chance to establish a footprint of equity positions across all Australia, now we’re looking at specific geographies and sectors to fill in the gaps or to develop our existing sites further,” Mr Dillon said.

“The board is still pushing forward with that growth agenda, with joint ventures being a key part of our growth strategy if they suit our model.

“We have a pipeline of opportunities as good as it has ever been.”

Despite the farm sector’s many seasonal frustrations and market gyrations he saw agriculture as a “very profitable and buoyant industry with a lot of growth opportunities.”

“The challenge is getting the business model right,” Mr Dillon said.

“We rely on a comfortable mix of business entities to achieve our financial targets, including CRT’s continuing major contribution to our bottom line.

“Our model for sustainability is a bit different to some, but it’s based on simple key drivers - managing working capital carefully, and retaining, attracting and developing good staff.”

Ruralco was born after the 2006 merger of long-established Tasmanian agency business Roberts and the NSW-based CRT group which traded on the Australian Securities Exchange as Ruralco.

Roberts mainly operated in Tasmania, with some ties in Victoria, WA and SA, while CRT’s network linked independent retailers Australia-wide who were also involved in real estate, wool, livestock and fertiliser sales.

In 10 years the reborn company has bought 26 existing CRT members’ businesses, but has also diversified away from its reliance on merchandise by establishing 46 greenfield agency and retail sites (mostly in Victoria and SA) and bought into another 96.

Notable expansion moves have included the high profile startup live export business, Frontier International Agri (partly staffed by former Elders employees), and the $57.4m purchase of the 37-store Total Eden water equipment and advisory service business in 2014.

“Our water-related businesses offer enormous growth opportunities and are a key focus of our strategy,” Mr Dillon said.

“Efficient use of water will be critical to agriculture’s success in the rather exciting times ahead.

“We see a lot of scope for new water infrastructure and technology efficiencies in the irrigation industry and on farms generally.”  

In addition to its plans to absorb more farm water and advisory expertise into its ranks, Ruralco wants to build on its leading position in water brokerage.

It traded 709,000 megalitres in 2014-15.

Meanwhile, its investment in livestock exports has opened the door to other opportunities associated with supplying animal protein to export or local markets.

Mr Dillon won’t say exactly where Ruralco’s ambitions lay, but vertical integration opportunities may be anywhere from stockfeed supplies to lot feeding or meat processing, if the right situation arose.

Similarly, the company’s ambitions in farm insurance and financial broking services offered scope for profit growth well beyond last year’s relatively modest $220m turnover.

“Our priorities focus on agriculture and finding scalable growth - if we are going to be in any particular area we want to be able to get bigger.”