SUNRICE'S debt now appears to be more manageable. PETER HEMPHILL reports

SunRice has slashed its debt by a third during the past 12 months, according to the company's latest financial report.

The half-yearly report to October 31, 2011, shows SunRice's debt is now $206 million - well below the $303 million declared in the scheme booklet prepared for the takeover bid by Spanish suitor Ebro Foods.

The latest accounts show the debt owed to the Rice Marketing Board to pay for the acquisition of rice storage sheds in 2006 has been whittled down to $19 million.

The debt owed to banks by subsidiary Australian Grain Storage Pty Ltd has increased slightly to $44 million, while core bank debt is now $77 million.

The report details seasonal debt now at a level of $66 million - less than half the $147 million in borrowings for the corresponding period the previous year.

SunRice directors used the issue of high debt as a reason for supporting the company's sale to Ebro.

Under "changed funding circumstances" in the scheme booklet released last April to inform shareholders on the Ebro bid, SunRice chairman Gerry Lawson said drought, increased debt, tightening credit markets and the difficulties in raising additional equity from growers had left the company vulnerable.

A whole section in the scheme booklet was devoted to detailing the company's debt.

Opponents of the Ebro bid complained during the takeover attempt that SunRice had not previously articulated a problem with the debt.

A number of shareholders said at the scheme meeting in Jerilderie in late May they were unaware of a parlous level of debt.

At the time, takeover opponents said the prolonged drought had hit everyone's business but they were now facing the best crop in years.

They suggested the company could be turned around if it was kept in rice growers' hands.

One of the leaders of the "no sale" group of opponents, Blighty rice grower John Bradford, said they felt vindicated by their stance against the Ebro sale.

Mr Bradford said while it was positive to see SunRice's debt fall to manageable levels, it had been at the expense of rice growers' viability. "We have got a lot of growers screaming for cash," he said.

"SunRice is paying a poor price for last year's crop."

Mr Bradford said the SunRice board should have looked at issues such as share dividends rather than drastically cutting pool prices.

The dividend paid to B-class shareholders was symptomatic of the debt problem, although it was not a major contributor to increased borrowings.

From 2006 to 2010, the SunRice board paid dividends of 21.5 cents to 22.5 cents on shares that regularly traded at about $2, even during the global financial crisis in 2008. In other words they were paying shareholders too much, said Mr Bradford.

He said after the Ebro bid failed last May, SunRice directors needed to cut the dividend in half as a way to get the debt under control. In June, the board pared it back to 18 cents, paying out nearly $10 million to shareholders.

Mr Bradford noted most of the directors had large holdings of B-class shares.

B-class shares can only be held by current and former rice growers under the SunRice constitution.

"B-class shareholders should have taken a bigger hit," he said.

"Why pay out a huge dividend when you've got a huge debt?"

The dividend savings only makes a small difference to the debt but signifies the tightening of the belt that needs to occur.

Good seasons can also have a big impact.

For the six months to October 31 last year, SunRice recorded a net profit after tax of $12.2 million.

The company is well on the way to exceeding the 2010-11 full-year profit of $13.1 million and back to pre-drought profit levels.

At a time when foreign takeovers of Australian agricultural companies have become a sensitive issue, the spurning of Ebro is a rare example of a company being kept in the hands of locals.

Opponents of the Ebro bid obviously feel a sense of justification.

SunRice would not comment.