Walnut investment pushes cotton player AFF to a $9.7m loss

The financial result is not a true reflection of the company's performance as it actually had a very strong year – with cotton crop yields as high as 15 bales a hectare – well above the top 20 per cent of Australian growers, who achieve yields of about 12 bales/ha.

However, the company's result was weighed down by a slide in the valuation of its significant stake in the listed broadacre cropping and nut company Webster of $19 million.

Webster, which last year bought listed western NSW farming and grazing business, Tandou, and AFF’s former Bengerang holdings at Moree and in southern Queensland, reported a statutory loss of $80.7m for 2015-16.

The result included a $96.5m writedown of goodwill from its acquisitions and reflected an 84pc slump in its horticulture division profits hurt by a poor yielding walnut season after last spring’s heat wave.

However, its agriculture division’s underlying profit of $24.8m reflected Webster’s much expanded cotton area and improved yields.

Ports and logistics businessman and 13pc Webster shareholder, Chris Corrigan, became executive chairman of the company in March replacing former Olam Australia boss and Bank of Queensland director, Richard Haire, who had held the role for just nine months after the Tandou acquisition.

Webster, which produces 90pc of the Australian walnut crop in Tasmania and the NSW Riverina, has just expanded its “Avondale West” orchard by a further 200ha with new walnut varieties, having planted 120,000 trees last year. 

It also expanded its irrigated Darling Farms operation at Bourke with the purchase of “Carbuu” this year.

Webster, which also processes and markets walnuts, runs 3500 cattle and turns off about 10,000 lambs a year, holds its annual general meeting this week.

AFF chairman David Robinson said AFF’s stake in Webster would continue to be held.

"I think the market is undervaluing Webster and I am confident that it will improve," he said.

"We will keep that Webster stake as a long-term hold and we will possibly even increase our stake in that company."

Another drag on the otherwise strong year for Moree-based AFF was an increase in leasing and corporate costs.

The company, which has just started harvesting about 16,896 hectares of winter crops, has about 60 per cent of its leases tied up with US financial services giant TIAA's Westchester

It is largest tenant of Westchester landholdings in Australia.

During the 2016 financial year, leasing costs were higher.

This was largely due to cheaper, drought-linked leases in previous years.

As the conditions for farming have improved the leases returned to a normal pricing regime.

Mr Robinson said there was no stated plan for the company to buy or lease more land, but he also said "if you look at our history we don't stand still".

The company, which banks with National Australia Bank, saw its average yield for irrigated cotton reach 15.10 bales/ha with an average price return of $574/bale, including seed.

This yield result is a significant increase from the previous season with an average of 13.9 bales per hectare and is well ahead of the industry.

"We are staying ahead of the pack, but the pack is improving as well," Mr Robinson said.

Mr Robinson said a vast majority of the improvement had come from advancements in agronomics but also good climate.

AFF and Webster have benefited from increased water availability in the past five months.

He said AFF’s 2017 financial year yield results were likely to be just as strong as those achieved in 2016.