Ruralco outperforms last year’s record first-quarter earnings

Published at Jan 23, 2017, in Features

Ruralco (ASX: RHL) informed the market on Monday morning that it had experienced positive trading conditions across most of its businesses in the three months to December 31, 2016, a development that appears to have been well received with the company’s shares hitting a high of $2.96 in the first 15 minutes of trading this morning, representing an increase of more than 7%.

It should be noted that broker projections and price targets mentioned in this article are only estimates and may not be met. Also, historical data in terms of earnings performance and/or share trading patterns should not be used as the basis for an investment as they may or may not be replicated. Those considering this stock should seek independent financial advice.

The group reports its full-year result on a September 30 basis, making this the company’s first-quarter result for fiscal 2017.

From an operational perspective, rainfall in the latter part of last year has been favourable for its summer cropping season with increased plantings of cotton and rice.

The group has also seen growth in sales of agricultural chemicals and pre-season fertilisers, reflecting improved farmer confidence. This has in turn generated robust cash flows from increased demand for general rural merchandise.

While Ruralco’s water business has experienced challenging conditions with above average rainfall experienced in the first quarter in South Australia, and recent and continuing warm weather in Tasmania where the group has a major project underway, management expects a full recovery of earnings by the end of year.

Ruralco enters 2017 with strong sales pipeline and improved livestock and wool pricing

Following the successful restructure of Ruralco’s live export operations in 2016, volumes have increased on the same period last year with a solid sales pipeline in place for the next quarter.

Over the next three months the recent rainfall and the availability of the irrigation water in a number of regions is expected to continue the demand for rural supplies products and services. This combined with continuing strong livestock volumes and prices and the recent uplift in the wool market are expected to underpinned agency trading conditions.

After Ruralco delivered its full-year result in November, Bell Potter maintained its hold recommendation while slightly increasing its 12 month price target from $2.88 to $2.98, implying a slight premium to the group’s opening price of $2.80 on Monday morning.

Bell Potter is forecasting Ruralco to deliver an adjusted net profit of $15.3 million in fiscal 2017, up from $13.4 million in fiscal 2016.

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