Ballance writes down $51m of stock

The global commodity market is now moving towards pre-Covid, long-term averages and the sharp drop in prices internationally left Ballance with over-valued inventory.

A result of the impairment is that the co-operative won't be paying any dividend to farmer shareholders this year. However, the revaluation of stock resulted in a drop in fertiliser prices from last week.

Ballance last week announced a profit after tax of $35m but the board is retaining profits for re-investment and "building resilience".

Co-op chair Duncan Coull says the $51m write-down of inventory holding is prudent and in the best interests of Ballance and its shareholder customers as it heads into an uncertain financial year 2024.

"A short-term outcome of this strategy is that we will not be paying a shareholder rebate in 2023 given the impact of the impairment and the need to protect the balance sheet," says Coull.

"The board continues to ensure we are building resilience into the co-operative by retaining $35m in FY23. This supports investment in assets that underpin our operating results, innovation, and our future decarbonisation plans."

In line with this investment, the board has recommended a lift in the nominal share price from $8.10 to $9/share, which it says reflects the increased retentions and the positive impact this has had on the equity within the co-operative.

"For New Zealand farmers and growers to compete on the world stage, access to affordable sustainable nutrients is a necessity. Despite these short-term impacts, Ballance remains focused on delivering an affordable and reliable supply of nutrients into the future, and to continue a strong innovation programme to ensure we support the transition to a low emissions, low carbon food and fibre producing nation," says Coull.

Ballance general manager sales Jason Minkhorst says as a farmer and grower-owned co-operative, it is committed to providing affordable nutrients for the coming season.

In an email to shareholders, Minkhorst points out that the re-valuation of stock provides them with the immediate value of softened global fertiliser prices.

"The products in this price change are now, on average, $450/tonne lower than they were this time last year.

"This price decrease will impact over 350 products across the range, giving you more price certainty to enable you to plan your spring and cropping applications with confidence," he told shareholders.

Ballance says its revenue for the year is $1.22b and total sales volume, including nutrient products, animal feeds and industrial ingredients, is 1.26 million tonnes.

Outgoing chief executive Mark Wynne says Ballance is guided by its founding reason for being as a co-operative, to provide a reliable supply of affordable and appropriate nutrients for New Zealand farmers and growers.

"The balancing of reliable and affordable supply was challenging in FY23. Global commodity prices reached record highs, driven by an energy crisis and the war in Ukraine," says Wynne.

"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 price we paid for nutrients in FY23 was higher than current market rates."