20/12/2005 - 21:00

Lean year as United plans ahead

20/12/2005 - 21:00

Bookmark

Upgrade your subscription to use this feature.

Western Australian rural input and services group United Farmers Cooperative has confirmed 2004-05 as a lean year in its annual report, but believes it has established a strong foundation to see off competition.

Lean year as United plans ahead

Western Australian rural input and services group United Farmers Cooperative has confirmed 2004-05 as a lean year in its annual report, but believes it has established a strong foundation to see off competition.

Operating profit slumped to just $194,000 for the year ending August, from $5.5 million as the cooperative held prices down all season, as the company ended up with a big amount of uncollected orders and faced delays in commissioning its Kwinana fertiliser plant.

The result meant there was no rebate paid to its 3,550 members, compared with $5.4 million in 2003-04.

Profit would have been $2.5 million better if $12.7 million worth of fertiliser purchased for delivery against orders received had been despatched.

Stock now sits at $41 million compared with $24.4 million the previous year.

The rise in stock levels also increased bank borrowings, which stood at $31.3 million at the end of United’s financial year compared with $12.3 million the previous year.

Overall sales were down to $117.9 million compared with $121.5 million in 2003-04.

In his report, United CEO Tony Usher put a positive spin on the drop, pointing out that farmers had effectively been paid a rebate up-front through lower prices, that the over-ordered fertiliser was available for sale this coming season and the Kwinana plant was operating better than expected.

Mr Usher also said that United’s services to members, such as wool and crop marketing, were performing well.

“With many wool producing members frustrated by high selling costs and poor returns, the introduction of our wool marketing service has proven timely,” he said in his report to members.

“In addition to offering savings on selling costs through the auction system, strong relationships with overseas clients is facilitating the supply of members’ wool direct to mill, generating an average premium of $50 per bale for our participating members.”

The success of this move is reflected in the change in United’s business mix, with fertiliser sales becoming less dominant.

According to the report of chairman Max Johnson, revenue has grown 40 per cent since 2002, but fertiliser has not had that sort of growth.

It now represents only 80 per cent of United’s sales, against 95 per cent in 2002.

This was part of a two-pronged approach United has taken to ensure the cooperative has a future.

“The board of United Farmers Cooperative recognised some time ago that preserve a farmer owned presence in an industry becoming characterised by increased market power among fewer suppliers, a strategic shift would need to be undertaken,” Mr Johnson said in his report to members.

He said it had been a catch-22 situation, trying to maximise results to pay a good rebate and keep prices down for members.

The new service business had been part of the strategy to tackle this issue, by adding new revenue streams in an attempt to reduce the reliance on no-frills fertiliser sales.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

Subscription Options