DIVERSIFIED listed agribusiness Ruralco Holdings has reported a record half-year net profit of $10.5 million, more than double the corresponding period the year before.

The result continues a sequence of recent positive listed agribusiness full and half-year results in the livestock sector during the past week, including Australian Agricultural Co and Elders.

Ruralco’s underlying net profit after tax for the six months ended 31 March 2015 of $11.3m was a 33pc rise on the same period last year, while pre-tax earnings rose 22pc to $26.9m.

Gross profit for the half-year of $149.7m was up 30pc, while sales revenue of $742.8m represented an increase of 36pc.

Ruralco’s acting chief executive officer, Travis Dillon, who took up the role following the sudden departure of John Maher earlier this month, said the excellent result highlighted the strength of the group’s earnings platform.

“This result is testament to the strength of the business and has been driven by a strong performance in agency and rural supplies despite challenging seasonal conditions,” Mr Dillon said.

Ruralco’s water activities delivered a strong result with six months contribution from Total Eden and high demand for water broking services. The company’s live export business, Frontier, continued to increase capacity and supported the wider network’s strong performance, he said.

Continued innovation in financial services with the recent launch of Ruralco Seasonal Finance product positioned this activity well for future growth.

Among key components of the business:

• Rural supplies increased gross profit by 33pc. This included growth in sales of merchandise and fertiliser from Ruralco’s established locations and recently acquired businesses.
• Agency activities increased gross profit by 18pc, headlined by an increase in livestock gross profit. This was driven by significantly higher cattle volumes transacted and prevailing higher prices for both cattle and sheep.
• Live export contributed $3.4m in gross profit. This business continues to build scale despite challenging international market conditions. Offsetting this strong gross profit result were mark to market fair value livestock adjustments and the impact of foreign exchange.
• Financial services gross profit declined 4pc, reflective of a general softening in the insurance market resulting in increased pressure on premiums.

Strategy ahead

Ruralco’s key strategies of platform growth and horizontal integration continue to add scale and diversity to the network, reducing exposure to cyclical earnings risks, Mr Dillon said.

“There is a strong business development pipeline of new acquisition and greenfield opportunities and a well progressed plan to drive future growth in high priority sectors,” he told shareholders.

Ruralco had developed two innovative finance products to drive sales throughout the network. The recent launch of Ruralco Seasonal Finance provided producers who require a line of credit for livestock purchases and seasonal inputs with a facility designed specifically with their needs in mind.

While early rainfall across most cropping regions had enabled the commencement of seeding programs, rain was still desperately required in northern NSW and western QLD to reduce the rate of livestock turnoff.

A weakened A$ is positive to all export agricultural commodities with overseas demand for meat and livestock likely to remain particularly firm, the company said. Continued demand for quality agricultural properties is expected to support elevated levels of real estate activity throughout the second half.

Frontier live export has a strong pipeline for the next six months and is scaling up to a two vessel model. Demand for water services is expected to remain strong, despite competition placing pressure on margins.

Assuming normal seasonal conditions, Ruralco targets continued strong year on year growth in the underlying profitability of the Group.

Source : ASX