Farmers benefit from fertiliser boom

By Hugh Stringleman, Agribusiness writer

Friday 2nd August 2002

The two big fertiliser companies made massive profits in the past financial year, and have returned the greater portion to farmer customers.

Ravensdown Fertiliser Co-operative declared a profit before rebate and tax of $63.3 million in the year to May 31. It was a huge increase on the $25 million result in the previous year.

Ballance Agri-Nutrients Co-operative reported a $50.4 million group operating surplus for the same period, up 17% on the previous year.

Both results would have put the two co-operatives in or near the top 10 of New Zealand companies based on profitability in the 2000/01 financial year, ranked by Management magazine.

Ravensdown will rebate $12.20 per tonne of fertiliser purchased, across 1.6 million tonnes of sales and make a bonus issue of 15 shares per tonne purchased. It was the equivalent of distributing $34.59 per tonne, chairman Jim Pringle said.

The rebate was worked out on the basis of a 10% dividend on the 122 shares/tonne required of farmers to be fully paid-up shareholders of the co-operative. Shares are not tradable but they are redeemable when the farmer exits the industry.

Ballance will distribute $23.40 a tonne purchased, by way of a rebate averaging $18.03 and a fully tax imputed dividend of 12c per share.

Total payout to shareholders will be $23.4 million, with the average being $1760 per farmer shareholder, of which there are 17,700, chairman Peter Jensen said. Total sales amounted to 1.48 million tonnes.

Mr Jensen said the excellent result had enabled Ballance to reinvest for future growth, fund major capital projects from cash flow, reduce debt and review goodwill and asset values in line with revised business expectations.

The equity ratio in the Ballance group was now a healthy 67%, he said.

Ravensdown also took the opportunity while profits are high to strengthen its balance sheet, write off intangible assets and repay debt. Its equity ratio is now 58%.

Both Ravensdown and Ballance are now nationally competing fertiliser companies, having taken over a number of smaller companies and expanded territories during the 1990s.

They differ in a fundamental way over marketing. Ravensdown recently elected to deal directly with farmers, via 0800 telephone numbers, the internet and mail. It now does 84% of its business that way, and claims to have reduced prices 5% as a result, plus a 1.25% discount for direct debit.

Ballance retains the traditional supplier-merchant agency structure with Wrightson, RD1, PGG Farm Supplies, Farmlands, LandBase and Greenfields.

Total fertiliser sales over three million tonnes annually compares very favourably nowadays with the depressed farming years in the late 1980s and early 1990s when only 1.2-1.5 million tonnes were bought and applied. The maintenance of higher levels of soil fertility is a major factor in annual productivity improvements for farming.

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