Windfall for Ballance shareholders

Shareholders in fertiliser company Ballance Agri-Nutrients will get an $11.5 million bonus share issue even though the company's operating surplus before tax is down 17 per cent.

Chairman David Graham told shareholders at the company's annual meeting in Rotorua yesterday the co-operative would issue 1.75 fully imputed $6 shares for every tonne of qualifying fertiliser bought during the last financial year.

The company said about 13,000 shareholders would receive an average of $897 in shares plus $442 in imputation credits.

The bonus issue gives transacting shareholders a return equivalent to $15.67 for every tonne of qualifying fertiliser bought. This is in addition to a $20 a tonne rebate and dividend announced in July.

The bonus comes despite the company saying in July that operating surplus before tax for the year to May 31 was $40.9 million, 17 per cent down on the previous year.

Graham said the bonus rewarded shareholders who supported the company with their business.

"The reason for issuing bonus shares is to reward our transacting shareholders, as it is these shareholders who have enabled the co-operative's financial position to improve."

Although profit was down, Graham said last year's result was strong, with volume sales of fertiliser up 5 per cent at 1.46 million tonnes and revenue up 10 per cent at $458 million in a "pretty static market".

"The co-operative has performed strongly over the last three to four years and a bonus share issue is a good way to mark our 50th anniversary," he said.

In July, the company said the fall in profit was the result of a strategic decision in the first six months to maintain fertiliser price levels in spite of rising shipping, fuel and raw material costs.

Chief executive Larry Bilodeau said yesterday these costs continued to put pressure on margins but were being partly offset through long-term supply contracts, forward planning and efficiency gains.

"After three months of trading in this financial year, we are ahead of sales in volume terms for the same period last year and the margins we are making on those sales are on budget. If everything continues on, and sales volumes continue on, we'll deliver something similar to what we've done this past year."

Analyst Mark Lister, of ABN Amro Craigs, said the picture was much the same across the whole agricultural sector.

"We've still got a strong economy so we're still seeing good increases in revenues and volumes and sales figures.

"But it's generally profit margins that are causing problems."

Bilodeau said the Kapuni urea plant had secured gas supplies through to mid-2006 and was evaluating supply options beyond 2007.

Rolling over short-term supply contracts was likely to continue for the foreseeable future, he said, and although "not ideal, Ballance will manage".

"With the international demand, and hence price, for nitrogen fertilisers being high, and with the freight and fuel rates being at all-time highs, the viability of Kapuni remains attractive."

On balance

* $11.5 million bonus share issue.

* Operating surplus before tax down 17 per cent.

* Margins under pressure from higher costs.

* Sales volumes ahead of last year.