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Sheep shortage helps record Ruralco profit

 

Agribusiness Ruralco has made a record annual profit partly because Australia does not have enough sheep.

Ruralco's rural supplies business benefited from fairly good rainfall in Tasmania, Victoria, South Australia and southern NSW as farmers bought more crop inputs such as fertiliser and weed killer.

High prices for cattle, sheep and wool also boosted profits.

Ruralco chief executive Travis Dillon says sheep, lamb and wool prices continue to stay high because demand from overseas outstrips supply.

He says the the size of the sheep flocks in Australia and New Zealand drives prices.

Sheep and lamb are exported all over the world but most of the wool goes to China.

Mr Dillon says global wool stocks aren't sufficient to meet demand.

"That's driving the demand for Australian products," he said.

""There's not enough sheep - the Australian flock of sheep is tens of millions of head down on what it was in its peak.

"It goes back to the deregulation of the wool price.

"The sheep flock in Australia has been depleting for decades."

Mr Dillon said record wool prices are encouraging existing wool producers to expand production.

Ruralco's net profit of $22.4 million for the 12 months to September 30 rose from $4.3 million in the previous year, when the bottom line was weighed down by the restructuring of its live export and water businesses.

Both restructured units posted earnings growth in 2016/17.

Ruralco's underlying profit, which excludes one-off items, rose 95 per cent to $26.2 million.

Ruralco's bottom line was also boosted by an increase in real estate volumes and acquisitions that added to the size and geographical reach of Ruralco's business.

Mr Dillon was pleased that Ruralco's core traditional businesses had delivered strong organic growth, and that there had been a positive turnaround in live export and water retail sales.

Ruralco said fairly good rainfall in the eastern states in September and early October should support sales of rural supplies over the next few months.

Cattle prices are expected to ease, returning to historically average prices, though in the short term prices will be largely influenced by seasonal conditions.

The medium-term outlook for wool, sheep and lambs is positive.

Mr Dillon said Ruralco will focus over the next 12 months on delivering the targeted earnings contributions from the portfolio of acquisitions completed in the 2017 calendar year.

Ruralco shares were up six cents, or 2.1 per cent, at $2.95 at 1208 AEDT, their highest level since September 5.

RURALCO POSTS RECORD PROFIT

* Full-year net profit of $22.4m, up from $4.3m

* Revenue up 2pct to $1.83b

* Final dividend up 4 cents to 6 cents, fully franked