Wednesday, April 24, 2024

Ballance absorbs $51m write-down on costly fertiliser 

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As global market settles, sharp price drop leaves co-op with over-valued inventory.
Ballance Agri-nutrients lowered the price of its N-based fertiliser products.
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Ballance fertiliser co-operative has taken two big financial hits in what it called a financial year of unprecedented challenges, cutting profit after tax by $20 million to $35m and writing off $51m on inventory.

No rebate will be paid to shareholders on products they bought during the year, compared with the $30 a tonne paid this time last year.

However, the revaluation of high-priced fertiliser stocks has cut $75-$150 a tonne off prices to farmers, who are now paying an average $450/t less than this time last year.

New, lower product prices were announced by sales general manager Jason Minkhorst on the same day the 2022 financial results were declared.

Ballance said international fertiliser prices are returning to pre-pandemic levels and the farmer- and grower-owned co-operative is committed to providing affordable nutrients in the coming season.

Comparisons between the latest FY2023 results and the 2022 annual report show that profit after tax dropped to $35m from $56m the previous year.

Revenue per tonne in FY23 was $968, compared with $755 the year before.

“The balancing of reliable and affordable supply was challenging in FY23,” Ballance chief executive Mark Wynne said.

“Global commodity prices reached record highs, driven by an energy crisis and the war in Ukraine.

“Access to nutrients got harder as countries looked to ensure food security, and while we were able to be agile in securing supply due to our long-term partnerships, the prices we paid were higher than current market rates.”

The global commodity market is now moving towards pre-covid, long-term averages, which is evidenced by a sharp drop in prices internationally, leaving Ballance with over-valued inventory.

Chair Duncan Coull said the inventory write-down and the need to protect the balance sheet mean no shareholder rebate.

“Retaining the $35m profit supports investment in assets that underpin operating results, innovation, and our future decarbonisation plans,” said Coull.

In line with this investment, the board has recommended a lift in the nominal share price from $8.10 to $9.00 a share.

The 2022 annual report said there were 45.6 million shares on issue across 17,000 shareholders and, assuming no substantial change in those numbers, total share equity will have increased to $410m.

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