Ridley Corporation Posts 9% EBITDA Growth as Fertilisers Acquisition Beats Forecasts

Ridley Corporation delivers 9% EBITDA growth as fertilisers acquisition exceeds expectations

Ridley Corporation reported underlying EBITDA of $55.4 million for the first half of FY26, representing 9% growth on the prior corresponding period. The result reflects the company’s first three months of trading following the fertilisers acquisition, which contributed at the higher end of management expectations despite covering only the seasonally weakest quarter.

Statutory net profit after tax surged 137% to $52.7 million, driven by a provisional gain on bargain purchase of $55.9 million recognised upon completion of the acquisition. The company lifted its interim dividend to 5.10 cents per share (fully franked), up from 4.75 cents in the prior period, reflecting management confidence in the underlying earnings trajectory. Leverage remained conservative at 0.8x, below the target range of 1-2x, while operating cash flow strengthened to $127.9 million from $49.2 million in the prior period.

What is EBITDA and why does it matter for agricultural companies?

EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) measures a company’s operating performance by stripping out financing decisions and accounting treatments. For capital-intensive agricultural businesses like Ridley that operate processing facilities and distribution networks, EBITDA provides a clearer view of cash-generating ability.

The metric removes four components:

1. Interest – financing costs that vary based on debt structure
2. Tax – payments influenced by tax strategies and jurisdictional differences
3. Depreciation – non-cash charges for tangible asset wear
4. Amortisation – non-cash charges for intangible asset consumption

Ridley’s underlying EBITDA growth of 9% demonstrates the core business is generating stronger cash earnings before considering how operations are funded or taxed. For investors, consistent EBITDA expansion indicates the business model is working regardless of capital structure decisions.

Segment performance reveals divergent fortunes across the portfolio

The company’s three operating segments delivered mixed results, with the diversified portfolio providing earnings resilience through commodity and weather cycles affecting different agricultural sectors.

Bulk Stockfeeds drives market share gains

Bulk Stockfeeds EBITDA increased $5.4 million to $27.1 million, representing 25% growth on the prior period. Volume growth of 13% in ruminant feeds and 7% in monogastric products underpinned the result, supported by higher-margin supplementary feeding of beef and sheep. The Ridley Direct distribution model delivered meaningful volume support, while EBITDA return on funds employed expanded to 39.4% from 26.5% in the prior period.

Packaged Feeds and Ingredients faces temporary headwinds

Segment EBITDA declined $10.1 million to $25.6 million, reflecting operational constraints rather than structural challenges. Short-term ovine supply constraints reduced volumes at Oceania Meat Processors due to lower industry slaughter rates, while one inoperable process water dam at Maroota constrained rendering capacity. Commissioning delays at the new Timaru facility further pressured margins, compounded by lower protein meal prices.

Partial offsets included rendering volume growth of 7%, packaged dog food volumes up 7%, and improved extrusion efficiencies from the aquafeed-to-petfood transition. Management is addressing capacity constraints through capital investments scheduled for completion in the second half.

Fertilisers delivers strong first quarter contribution

The newly acquired Fertilisers segment contributed $10.3 million EBITDA from three months of trading in the seasonally weakest quarter (July to September). The result exceeded the higher end of expectations, supported by cost control and margin management. For comparison, the distribution business under prior ownership delivered $8.6 million EBITDA (adjusted) in the equivalent period, indicating growth under Ridley’s management.

The seasonal nature of fertilisers demand means peak earnings are weighted to the second half, with winter crop applications (grains and oilseeds) driving Q3 and Q4 volumes.

• Bulk Stockfeeds: EBITDA $27.1m (+25%), driven by volume growth and higher-margin supplementary feeding
• Packaged Feeds & Ingredients: EBITDA $25.6m (-28%), impacted by temporary operational constraints and lower commodity prices
• Fertilisers: EBITDA $10.3m (3 months), at higher end of expectations in seasonally weak quarter

Acquisition integration progressing with $15 million in annual synergies identified

The fertilisers acquisition completed on 30 September 2025 for $433.7 million (cash consideration of $357.7 million plus deferred consideration of $76.0 million). Fair value of net assets acquired totalled $489.5 million, resulting in a provisional gain on bargain purchase of $55.9 million that will be finalised within 12 months post-acquisition.

Management restructured the business in February 2026 to a regional distribution model, removing 45 staff roles and reducing costs by $8 million per annum from FY27 (one-off restructuring costs of $3 million in FY26). Corporate synergies of $7 million per annum are expected from calendar year 2027, bringing total identified savings to $15 million annually once integration is complete.

The company expects to migrate the Fertilisers business onto Ridley’s ERP system in calendar year 2026 at an estimated cost of approximately $30 million.

Total Annual Synergies

$15 million in recurring cost savings identified:

• $8m from regional restructure (FY27)
• $7m from corporate synergies (CY27)

Capital allocation and balance sheet strength

Disciplined capital management positions the company for further growth while maintaining shareholder returns. Leverage of 0.8x sits below the target range of 1-2x, providing capacity for working capital requirements through the seasonal fertilisers cycle. Operating cash flow of $127.9 million demonstrates strong cash conversion, supported by available liquidity of approximately $430 million from cash and undrawn bank facilities.

The interim dividend of 5.10 cents per share (fully franked) represents a payout ratio of 59% of underlying net profit, within the target range of 50-70%. The conservative balance sheet provides flexibility for organic growth investments while delivering consistent returns to shareholders.

Strategic growth levers and outlook

Management expects FY26 earnings growth to be driven by three factors: nine months’ contribution from Fertilisers (including the second-half seasonal peak), increased market share in Bulk Stockfeeds through volume-related operational efficiency, and processing improvements from capital investments in Packaged Feeds & Ingredients alongside modest commodity price recovery in the second half.

The company will present its FY26-28 Growth Plan at an Investor Strategy Day on 10-11 March 2026 in Geelong. Strategic updates include the Perdaman urea off-take contract on track to commence in FY28, with a decision on the Phosphate Hill supply contract expected during FY26.

Growth capital investments are delivering measured returns:

1. Lara Feedmill debottlenecking: $5.7 million project with 5-year payback, scheduled for completion in CY26
2. Gunbower concentrates line: $1.6 million project completed in November 2025 with 2-year payback
3. Maroota cooling dam replacement: Scheduled for 2H FY26 to restore full rendering capacity

The diversified portfolio provides resilience through commodity and weather cycles, with Ridley holding number one market positions across each business sector. The integration of the fertilisers acquisition is progressing to plan, positioning the company to deliver shareholder value from identified synergies while maintaining financial discipline.

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