Thursday, November 30, 2023

Farm sales secure return of Rural Equities dividend 

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Sale of Southland and South Canterbury farms fatten cash reverses to $11.5m.
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Rural Equities will resume paying a dividend after the sale of two farms boosted its cash reserves.

After the unlisted securities exchange (USX)-listed farm investment group, which is majority owned by the Cushing family, completed a share buyback in October 2021, purchased a new mid-Canterbury dairy farm and upgraded capital expenditure on its property portfolio, it was left with $1.7 million in cash reverses at the end of June last year – down from $22.7m the year before.

Because of that reduction and to allow it to consider other investment opportunities, no dividend was paid for the past financial year.

However, after selling two of its dairy farms, one in Southland and the other in South Canterbury, for $10m, its cash reverses increased to $11.5m in the year ended June.

The company said it would pay a dividend of 15 cents per share for the year.

Rural Equities owns 17 rural properties across the country with a mix of sheep and beef, deer and arable.

Seven of its directly managed properties are dairy farms, and approximately 5450 cows are milked together with 50/50 sharemilkers.

Farms have been under pressure recently with on-farm inflation raising production costs and commodity prices dropping.

The company’s total comprehensive annual income dropped from $16.6m to $719,000.

Its operating earnings before interest and tax (EBIT) increased to $8.1m compared to last year’s $6.8m.

Operating earnings after tax for the year were $6.1m equating to earnings of 21.6 cents per share – a 19.8% increase on last year’s $5.12m.

Meanwhile, Rural Equities’ net asset per share at the balance date was $6.68 compared to $6.65 last year.

The group’s property portfolio reduced by $7.1m, with its investment portfolio increasing by $1.8m.

Executive chair David Cushing said Rural Equities is pleased with the improvement in operating earnings and the lift in net asset value in a declining rural property market with reduced commodity prices and increased farm operating costs.

“This is a satisfactory operating performance, and we are pleased to recommence meaningful dividends.”

The board believed that the rural property market would continue to be subdued due to lower commodity prices, the Chinese economic slowdown, environmental legislation uncertainty and other economic factors.

“However, there are some indications Chinese demand for New Zealand dairy products could increase by the end of 2024, assisted by the removal of tariffs early next year. Directors expect dividends from the equity investment portfolio to materially increase in the year ahead to partially offset lower milk prices,” he said.

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