SunRice seeks new business growth as COVID and export rivals bite

SunRice eyes new growth options to counter Aussie crop challenges

Agribusiness
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Refreshed by big crop prospects for the coming summer, SunRice is planning for a year of accelerated growth

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After splashing out on a $66 million buying spree late last year, cashed up national rice exporter SunRice is strongly hinting at more acquisitions on the drawing board.

Emboldened by a post-drought rebound for irrigation water availability and big crop prospects for the coming summer, the Riverina-based processing and marketing kingpin is touting "a year of accelerated growth".

Beefing up the diversity of SunRice's revenue base is also considered essential given fewer countries can afford the premiums required for Australia's high quality home-grown rice these days.

Soaring shipping costs and freight delays are also chewing into export returns and COVID-19 has disrupted, or seriously wounded, some overseas markets.

In December SunRice bolstered its foothold in the non-rice, gourmet foods segment paying $51m for the KJ&Co brands business to add scale and support to its long established Riviana Foods division.

The new portfolio includes specialty breads and pizza bases, soups, snacks and chilled desserts, while Riviana added cakes, ice cream and breakfast products to its food service and retail range.

SunRice also extended its stockfeed business CopRice to New Zealand with the $11m purchase of a dairy nutrition business from poultry giant Ingham's and paid $5m for another feedmill in Victoria's Gippsland.

Prepare for growth

CopRice has a new general manager charged with making the most of its recent acquisitions and "preparing the business for the next phase of growth".

Ganesh Kashyap was previously with food giant Mondelez, heading up its e-commerce roll-out in the Asia-Pacific, and more recently its whole business in Japan.

"SunRice will focus on accelerating delivery of its 2024 growth strategy in 2021-22, continuing to leverage its strong balance sheet to explore value-accretive acquisition opportunities," managing director Rob Gordon told the company's annual general meeting.

Mr Gordon said although good seasonal conditions and pasture growth in many areas meant CopRice was at a low point in the stockfeed demand cycle, the company was deliberately using its strong balance sheet to make acquisitions, preparing for a market upturn.

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He noted December's KJ&Co brands acquisition had already delivered balance sheet benefits and would be earnings per share accretive in 2021-22, while the CopRice acquisitions were also contributing positively to earnings.

After struggling to secure just 54,000 tonnes of rice in 2019, then even less (45,000t) in 2020, SunRice will mill and market about 417,000 tonnes harvested this year in its southern NSW heartland, and prospects for an even bigger harvest in 2022 are bullish.

Value-added investing

The company has been preparing for a harvest volume revival by spending $4.5m upgrading its microwave rice production line at Leeton, with more investment in value-adding assets to follow.

A more cost efficient milling strategy and receival footprint for its big Deniliquin mill is also being devised.

There is a limit on the amount of Australian rice that can be sold at a premium price, and those markets are changing - Rob Gordon, SunRice

Mr Gordon said the largely farmer-owned business must adapt to a reality that our world-renowned medium grain rice crop was now challenged by "a number of good quality and affordable grains from other origins".

"There is a limit on the amount of Australian rice that can be sold at a premium price, and those markets are changing," he warned.

Lower milling conversion costs and a bigger crop throughput would help offset the lower returns SunRice expected as it was forced to seek out reduced premium export options.

Chairman Laurie Arthur said rebounding production meant SunRice could get back to doing what it does best - growing and selling high quality branded rice products.

At the same time, however, it would keep building on its multiple supply chain strategy to keep meeting demand even when Australian production was extremely low.

Overseas supplies

SunRice now sources rice from 12 countries to service export markets and some domestic needs, including long grain and jasmine rice from its Vietnam mill for a new SunGold brand targeting Australia's food service sector.

Mr Arthur said given climate change's impact would be focused on annual croppers such as ricegrowers, the company was actively pursuing strategies to reduce the damage of future droughts, including establishing new supply chains, improving manufacturing efficiency and heavily investing in crop research to improve yields.

Mr Gordon said it was imperative every aspect of the SunRice supply chain was optimised so highest possible returns could be accumulated for growers.

While it was "incredibly pleasing" to be out of drought at present and focusing on growth, he said quality rice sourced from a range of overseas origins would ensure overall demand for bulk and branded products could be met and different markets could be targeted at different price points.

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