SunRice warns of ‘worsening inflation’ after 167pc surge in profit

Global shipping disruptions and an ‘escalation’ in freight costs have hit Australia’s rice export monopoly.

Cereal and snack company SunRice has warned “worsening inflation” will put pressure on the group’s earnings but says it is well placed to handle the volatility thanks to a bumper crop.

Chief executive Rob Gordon said while the year to April 30 “finished strongly” – with the company’s net profit surging 167 per cent to $48.7m – spiralling costs would hit the company in the year ahead.

“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,” Mr Gordon said.

“However, the group will seek to recover the additional costs incurred previously 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.”

SunRice, the consumer brand and trading name of Ricegrowers, listed its class B shares – which have no voting rights but are linked to dividends – on the ASX in 2019. It shares surged 3.4 per cent to $7.70 in afternoon trade on Thursday.

It comes as SunRice completed its biggest harvest in five years at 675,000 paddy tonnes. Mr Gordon said the water availability and pricing also “remain highly favourable” ahead of planting of the next Australian Riverina crop, which will be marketed in 2024.

“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.”

Overall, the group’s revenue jumped 30 per cent to $1.3bn. Mr Gordon expected revenue growth to continue in the year ahead.

“The foundations laid since FY2017 under the group’s growth strategy have so far delivered positive outcomes through the cycle and should see the business well positioned for FY2023 and the future. In addition, the Group’s diversified portfolio and strong balance sheet mean it is currently well placed to take advantage of further expansion opportunities, either organically or through acquisitions,” Mr Gordon said.

SunRice will pay a full franked final dividend of 25c per class B share, which is quoted on the ASX, on July 29. This takes its full year payout to 40c a share, including a 5c special dividend.

“These dividend distributions recognise the significant improvement in earnings performance in FY2022 and the ongoing execution of the Growth Strategy, which has seen the group deliver through the drought cycle, continue to diversify its earnings portfolio and progressively build a more robust earnings base which is less exposed to fluctuations in Australian rice production,” Mr Gordon said.