Small Caps | Apr 13 2026
This story features RIDLEY CORPORATION LIMITED.
For more info SHARE ANALYSIS: RIC
The company is included in ASX300 and ALL-ORDS
Agricultural company Ridley Corp is set for solid earnings growth from its recently acquired fertiliser business along with growth in its legacy businesses.
- Ridley Corp posted mixed first half results for its core businesses
- Newly acquired fertiliser business exceeded expectations
- A turnaround in that business will drive FY26 growth
- Core businesses also set for improvement
By Greg Peel
Ridley Corp ((RIC)) is a diversified agricultural company with leadership across its core businesses of Bulk Stockfeeds and Packaged Feeds & Ingredients, and the recently acquired Fertiliser Distribution business.
Ridley acquired IP Fertiliser from Incitec Pivot ((IPL)) in September last year.
In late February, Ridley reported a broadly in-line first half result versus market consensus, showing earnings outperformance in Bulk Stockfeeds, up 25% year on year, offset by a tough operating environment across Packaged/Ingredients, down -28% year on year, due to capacity constraints and commodity price headwinds.
The result marked the first which included three months of the newly acquired IP Fertiliser business, which delivered a ‘beat’ of 10% ahead of consensus forecasts.
UBS suggested this is what drove a 16% share price surge on the day.
The Fertiliser Business
IP Fertiliser (IPF) was acquired in September and represents 45% of Ridley’s forecast FY26 earnings. IPF is a market leader with 46% east coast share but had underperformed for many years.
Jarden believes Ridley is well placed to execute a turnaround based on its own track record since the current CEO took charge in 2019.
Ridley has outlined several initiatives across IT synergies, labour cost reductions, procurement savings and distribution efficiency improvements. Beyond what’s been announced, Jarden’s industry feedback suggests opportunities to address staff incentives, customer service and pricing strategies.
Management said at the time of the first half result release the integration of IPF is progressing to plan. Ridley is transitioning the business from a manufacturing business into a lean distribution-only model. IPF was restructured in February to a regional distribution model.
The aim is to align sales and execution to improve customer service, promote timely decision-making and drive accountability in cost control.
Morgans noted this business model was originally applied to Bulk Stockfeeds back in 2019 and has been very successful since. The expected synergies from IPF were upgraded to $15m compared to $7m previously, given Ridley is reducing support functions which will remove costs by -$8m from FY27.
At a March FY26 trading update, management outlined its new three-year strategic plan and reiterated its outlook statement, expecting group earnings growth to be driven by:
- 1) Nine months of contribution from IPF, including second half seasonal peak demand;
- 2) Increased market share and volume related operational efficiency in the Bulk Stockfeeds Segment; and
- 3) Processing improvements from capital investments in the Packaged Feeds & Ingredients Segment, and modest commodity price recovery in the second half.
The new three-year strategic plan validated Canaccord Genuity’s expectations for sustained earnings growth over the medium term.
But at the trading update, Ridley needed to address the elephant in the room.
The Middle East
Ridley’s new IPF business does not produce fertiliser, it only distributes it.
No sooner had the company reported its first half results, Trump bombed Iran, and Iran closed the Strait of Hormuz, through which 18% of global fertiliser exports normally pass.
Most of IPF’s urea fertiliser is sourced from the Middle East and prices have spiked.
Management addressed the issue at its March trading update, and Canaccord was encouraged by the trading update and specifically expectations that FY26 earnings will not be materially affected by supply constraints in the Middle East.
In Canaccord’s view, this reflects diversity in supply, substitution in nutrient demand profile associated with adjustments in winter crop plans, and the prospect of some margin increase in a tight supply environment.
Jarden nevertheless highlights a supply shortfall risk, which may be partially mitigated through alternative sourcing in Asia; margin risk, if urea prices rapidly correct and Ridley is holding some stock purchased at elevated prices, which to at least some degree can be managed by execution discipline; and demand risk if farmers simply buy less fertiliser.
If management believes FY26 earnings are not expected to be materially impacted by the Middle East conflict, Jarden suggests, in the immediate term, Ridley may be experiencing a benefit as older stock is priced to customers at the new elevated rate.
A sustained oil price rally is also likely to support biofuel demand, Jarden notes, which could drive higher tallow prices (within the Packaged & Ingredients segment) as an input for biofuel production.
Looking Ahead
Following Ridley’s first half result release, before Trump bombed Iran, UBS suggested IPF’s three-month consensus ‘beat’ should drive greater investor confidence in management’s execution of a deft turnaround, and address elevated costs and inefficient pricing strategies in the legacy business.
Into the second half, UBS expected a reversal of most headwinds within Packaged/Ingredients, aided by plant de-bottlenecking, higher slaughter rates and a modest commodity price recovery. Plus, commentary suggested continued momentum in Bulk Stockfeeds reflecting share gains.
In UBS’ view, this should drive solid core business (ex-IPF) earnings growth in the low single digits over FY26. With the fertiliser turnaround story yet to fully play out, and positive momentum starting to build, UBS retained a Buy rating with a $3.20 price target.
Morgans noted Ridley is a dominant, diversified player in the Australian agricultural sector with leading positions across stockfeed, rendering, pet food and fertiliser distribution. The stock is seen offering a strong multi-year earnings growth profile from optimising and improving the returns from IPF.
There are also cyclical tailwinds and further growth projects for its existing businesses, Morgans noted. Ridley’s management team has a strong track record and Morgans anticipated significant upside from the IPF acquisition, sticking to an Accumulate recommendation and a $3.20 target.
Assessing the strategic growth plan outlined in March, existing/known initiatives had been included in Canaccord Genuity’s forecasts (excluding M&A). New and tangible initiatives, such as the reset of the Fertiliser distribution network, were not yet reflected in Canaccord’s forecasts and therefore presented some upside risk.
Nor were continuous improvement initiatives broadly reflected. These initiatives are aligned to Ridley’s core competencies and expectations for “leveraging the flywheel” –- driving efficiencies with some of the benefit shared with customers to stimulate demand, maximising utilisation, and investing in facility upgrades.
In aggregate, Canaccord views Ridley as well positioned to deliver sustained earnings growth over the medium term, with forecasts implying an earnings per share compound annual growth rate of 17% in the three years to FY28.
Canaccord retained its Buy rating and $3.52 target.
Jarden this week initiated coverage of Ridley Corp with an Overweight rating (one rung below Buy) and a $3.10 target.
Jarden suggests Ridley’s core thesis of continued capacity expansion and efficiency projects, combined with a turnaround of the acquired IPF business, should drive high single digit earnings per share growth with upside risk.
Jarden thinks the market is underestimating the earnings potential in IPF due to the turnaround and, to a lesser degree, in Bulk as more mills are debottlenecked.
Management’s target of a more than 15% per annum total shareholder return, on Jarden’s forecasts, includes a 5% dividend yield. The stock is trading on 12x PE, which Jarden thinks looks undemanding given the growth opportunity, plus relative defensiveness in an uncertain economic backdrop.
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