Offering value despite tough year
A work in progress is how Farmlands chair Rob Hewett describes the rural trader's 2024 annual results.
The rural services trader is blaming another challenging year in the agriculture sector for its $7m net loss for 2024. In 2023, the company’s net loss was over $2m.
In response to tough economic times, Ruralco recently reassessed its strategy and made the call to concentrate its focus on its original home-base of Mid Canterbury.
Board chair and former Speaker Sir David Cater says its national growth strategy was not viable under recent economic conditions and going forward, did not have full board support, leading to a change in strategic direction.
Other steps taken include reducing headcount by more than 15% across the business, with the executive team being halved; and consolidating Ruralco’s Ashburton staff into one premises and selling its old head office building.
“There is no doubt our farming community continues to face financial challenges with high farm input costs and the cyclic nature of commodity markets impacting budgets and margins. Ruralco is not excluded from these challenges and is not immune to the impacts of the economic climate which is affecting our farmers and shareholders,” says Carter.
Despite this, he is confident Ruralco will survive.
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“It has been a rough year, and we have done a lot of work to reset the business, and this is ongoing.” Continued local Shareholder support and loyalty will be vital in ensuring Ruralco’s ongoing success.
Carter says the 2024 result is a combination of a financial clean-up and business reset combined with the tough economy.
“We knew at the start of this financial year it would be another tough year,” says Carter.
“While we have managed to remove $2 million in operating expenses (annualised), and achieve a significant $1.3 million turnaround in EBITDA, despite lower revenue, this wasn’t enough to achieve a cash operating profit for this season.”
Contributing factors include $4.71 million impairment of intangible assets, which is a non-cash accounting adjustment, and includes the cashflow Ruralco’s card system would have generated if the co-operative continued with its proposed nationwide growth strategy. Legislative changes necessitated an upgrade of Ruralco’s card system to future proof the business, and at that time the decision was made to move to a revolving credit card as part of that strategy.
Other contributors to the group net loss were a heightened provision for expected credit losses (ECL’s or potential bad debts); growth in interest expenses; and non-cash accounting adjustments which included a clean-up of fixed assets, debtors and creditors/ledgers.
The year’s group turnover was $288 million compared with $293 million in 2023; while the group total revenue was back 3% to $49.88 million compared with $54.66 million last year. Gross Profit was $11.22 million compared to last year’s $11.98 million which was a reduction of 65 and highlights the heightened competition in the industry and the general downturn.
“It has been pleasing to see the $1.3 million (year on year) EBITDA turnaround and this is particularly significant because this improvement shows the viability of our co-operative,” says Carter.
EBITDA in the 2024 financial year showed a loss of $85,000 compared to a loss of $1.39 million in the previous year.
The board has recently confirmed Tony Aitken as Ruralco’s chief executive, recognising their confidence in his steady leadership and clear direction since stepping into the role on a fixed-term basis in September last year.
