QUEENSLAND growers are "gutted" by the shock closure of struggling NZ-based fertiliser co-operative Ravensdown's Queensland operations.
Customers, employees and suppliers of Ravensdown Fertiliser Australia (RFA) were told today about the planned "orderly wind down" effective immediately.
“It may come as a surprise for some and a disappointment for many that we’ve had to take this action,” said RFA chairman Greg Campbell.
“(But) as directors of a loss-making operation, we had to avoid the potential erosion of shareholder value in terms of their assets and equity."
Funds will be returned to shareholders in accordance with RFA’s constitution after a sale process, under which RFA’s redeemable preference shareholders have priority over the ordinary shares held by Ravensdown.
After being courted heavily by Canegrowers, Ravensdown NZ set up a Queensland arm - RFA - in 2009. Canegrowers said today in a statement, "For the past five years, Queensland growers have been enjoying the transparency and increased competition that the company brought".
“A great opportunity to maintain competitive transparency in pricing has been lost," Canegrowers CEO Brendan Stewart said.
Mr Campbell said the decision to "act decisively" ahead of the busy buying season would reduce risk for shareholders and would "minimise the potential for disruption to fertiliser supply".
“The hard reality is that despite some excellent support from many growers, we just did not get enough cane growers buying all their fertiliser from the business.
"The resulting low margins meant the business was not viable,” Mr Campbell said.
The decision to cease trading was made after a strategic review, undertaken by RFA with Ravensdown Fertiliser Co-operative, commenced in March. Discussions with the nine employees are now taking place and career counselling is being offered.
The leased office in Brisbane and store in Mackay will close while utilising its Townsville fertiliser storage facility and office, until realising the value RFA holds in this store.
RFA was set up in 2009 after cane growers invited the co-operative to start supplying soil nutrients. The business plan based its viability on a 100,000 tonnes a year target.
After earning a $1 million profit in its first year and enthusiastic support from the Canegrowers industry organisation, the business invested the equity raised by the growers in stores and services.
However, due to cyclones, flooding and depressed world prices for sugar, the subsequent four years were more challenging for RFA, with fertiliser tonnages reaching 70,000 tonnes last year. As a result, the business has lost an average of $660,000 a year.
Ravensdown signed an agreement last September for the sale of its Western Australian facilities and operations to Louis Dreyfus Commodities, blaming difficult market conditions in WA which led to "unacceptable results" for another financial year. Operationally the trading loss in WA was in the order of $7 million on the back of three previous years of smaller losses.
In the context of that agreement, Louis Dreyfus Commodities acquired the assets, resources and existing contracts of Ravensdown’s WA operations.
Ravensdown took over the United Farmers Co-operative business in WA in 2008.
Queensland growers will be now watching the price of fertiliser nervously, said Mr Stewart, calling RFA's exit "a major blow" for the industry.
“In five short years we have provided cost savings to farmers of around $20 million and bought transparency and competition to the fertiliser market,” he said.
”Whilst this venture may not have been sustainable in the end, we can at least take pride in the fact that we took decisive action to intervene in the fertiliser market."
Mr Stewart said while growers would be "bitterly disappointed" by the withdrawal of Ravensdown, he would "bet his bottom dollar" they will come out swinging on the other industry issues.
“Mark my words: this news is going to absolutely galvanise our growers into the fight of their lives on the other enormous issues being faced by the industry currently, notably getting a fairer solution on electricity pricing and doing everything to convince Wilmar to stay within the industry-owned QSL marketing model and not set up its own marketing arrangements.”