The new figure makes up 87% of the fertiliser co-operative’s gross trading profit of $35m for the year ended May 31, down from the previous year’s $81m. A dividend will not be paid.
Tight farm budgets had meant the strong performances of earlier years were unlikely to be matched, but trading had been reasonably steady in difficult conditions, chairman David Peacocke said. The major problem was an unforeseen trading loss by the Kapuni ammonia urea plant.
A catalytic converter breakdown at the plant near the start of the year led to lost profits and capital costs totalling $13m, chief executive Mark Wynne said.
The Kapuni contribution to profits previously had allowed Ballance to pay superior rebates to shareholders, he said. “We hit a bump in the road this year and we expect to deliver more returns for our shareholders again next year.’’
Kapuni was a complex plant, and the breakdown required specialised replacement parts custom-made in Europe, with a lead-time of nine months from manufacture to installation. It had been operating at 75% of capacity for most of the year.
The co-operative was continuing to explore partnership options for a complete redevelopment of the plant. A partial upgrade of the existing plant had been ruled out and the exploratory work on this had resulted in a $5.5m write-down.
During the trading year, Ballance had kept prices as low as possible, making allowance for tight farm budgets, Wynne said. This had reduced profit margins.
The co-operative would make rebate payments averaging $25 a tonne on fertiliser purchases. A shareholder buying 100 tonnes could expect to receive $2500. Payments would start to be made from this Friday (July 29).
Total sales for the year were 1.62 million tonnes, down from 1.75m tonnes. Revenues fell to $837m from $893m.
Ballance retained a strong end of year balance sheet, with the equity ratio steady at 81% of total assets, Wynne said.
