Record year for SunRice

Rob Gordon.

SunRice has managed to withstand multiple pressures to finish in financial year 2022 (FY22) in a very strong position.

The global food company’s revenue, naturally determined paddy price and dividends are all at the highest levels in the group’s history.

The company attributed the strong financial performance to progress against the growth strategy and the return of Australian rice.

SunRice Group CEO Rob Gordon said the result was delivered despite challenging trading conditions and “continued headwinds”, including unprecedented escalation in freight rates, and systemic supply chain disruption.

“The business has delivered an outstanding result after two years of near record-low Australian rice production – a period in which the company diverted resources to maintain supply of key markets with rice from other origins, while still investing in new acquisitions and progressing other organic growth initiatives,” Mr Gordon said.

“This improved FY2022 result was the consequence of the return of Australian rice to key markets, the accretive contribution of recent acquisitions, and the group’s multi-origin, multi-price point international rice supply capability.

“It was also the result of the incredible dynamism and efforts of our people, who continued to demonstrate extraordinary resilience two years into the COVID-19 pandemic.

“The group is well positioned for financial year 2023 and beyond. This is particularly the case given the resurgence in Australian supply, our capabilities in international rice sourcing and emerging drought conditions in key rice production areas around the globe.

“However, there are substantial challenges – most notably the ongoing disruption to global shipping and escalation in freight costs, and worsening inflationary pressures on key business inputs.

“We remain focused on utilising our strong balance sheet to explore further value-accretive acquisitions which align with our growth strategy and continuing to invest in consumer and market-focused organic growth initiatives.”

Group revenue for FY2022 was $1.3 billion, up 30 per cent on the previous 12 months, while EBITDA (earnings before interest, taxes, depreciation, and amortization) of $91.3 million and net profit after tax of $48.7 million were up 86 per cent and 167 per cent respectively.

There was a record fully franked dividend distribution of 40 cents per B Class Share for FY20221.

The record naturally determined crop year 2021 pool paddy price was $428 per tonne for medium grain Reiziq, while fixed price contracts were also offered at $475 per tonne for limited volumes of Reiziq and up to $625 per tonne for specialty varieties.

SunRice Group said the FY2022 Financial Results were driven by a range of factors:

  • The increase in Riverina rice production, which allowed the Australian Rice Pool Business to absorb its share of overhead costs after two years of losses hampering group profitability and which in turn improved the cost base of the Rice Food segment.
  • Accretive full-year contribution of the KJ&Co Brands business, acquired in Financial Year 2021, by the Riviana Foods segment. This transformative acquisition drove a material uplift in revenue and profitability for Riviana Foods which, when combined with other existing brands, is now providing SunRice with a significant source of consistent earnings which is decoupled from the Australian agricultural cycle.
  • The group’s international sourcing expertise, which allowed demand of more than 1.1 million paddy tonnes to continue to be met at different price points through our multi-origin supply capability that covered 11 countries in FY2022.
  • Continued cost containment discipline and volume growth, which supported improved profitability in key Pacific markets.
  • Market share gains in microwave products, supported by organic initiatives such as the relaunch of the ‘Our Best Yet’ microwave rice pouch range, underpinned by investment in manufacturing capability and in-house innovation.
  • Management of challenges including the impacts of COVID-19; uneven recovery across markets and the food service sector; and unprecedented escalation in freight and other manufacturing input costs, as well as supply chain complexity, absenteeism and labour shortages.
  • Hampered performance of the CopRice segment, due to challenging operational conditions and market contraction driven by favourable pasture conditions in eastern Australia.

Looking ahead to FY2023, the group expects top-line revenue to continue to build.

While FY2022 finished strongly, FY2023 has started with worsening inflationary pressures on key business inputs and costs, and continuing volatility and disruption to global shipping, placing pressure on earnings.

However, the group will seek to recover the additional costs incurred progressively throughout the year.

Against that backdrop, the continued resurgence of Australian rice coupled with SunRice’s multi-origin, multi-market rice capability has the group well placed to benefit this year from an environment where key markets are under-supplied due to factors including broader disruption from the Ukraine conflict and a number of rice growing regions either in, or entering, drought around the world.

The CY22 Riverina crop just harvested, of about 675,000 paddy tonnes, should underpin positive contribution to both A and B Class shareholders through strong returns in the Australian Rice Pool Business and favourable inputs in a number of profit businesses, further demonstrating the complementary nature of the group’s business model.

Looking ahead to planting for the next Australian Riverina crop, which will be processed and marketed in FY2024, seasonal conditions, water availability and water pricing remain highly favourable, with water storage levels in the southern Murray-Darling Basin connected system the highest at this point in the season in more than 20 years.