News

Paraway posts record $67.1m net profit

Jon Condon, 11/04/2016

MACQUARIE Group’s pastoral entity, Paraway Pastoral Co has posted a record $67.1 million net profit for its financial year ended December 31.

paraway logoThe result was well up on the previous year’s $23m net profit, and was easily the best performance in the company’s eight-year history.

Underpinning the financials was rising cattle and sheep prices, and an increase in value of land assets – especially in the company’s northern Australian operations.

With the removal of three ‘one-off’ adjustments including last year’s Walhallow property sale ($14.75m net gain), and property and water revaluations, the $89.2 million pre-tax profit comes back to an underlying operating result of $53.32m – also a record for the company’s operations.

Paraway’s financials show a land value appreciation of $21 million last year, representing an increase of between 4 and 5pc on the previous year. Water licences were also revalued, showing an increase of $7.9m to $31.3m.

The same trend was evident in land valuation adjustments reported by AA Co in this separate item this morning, although AA Co claimed a much larger 15.8pc value increase. The Paraway revaluation was done considerably earlier, however, back in December 2015, which may have failed to capture more recent market movements evident in the AA Co exercise.

Paraway is among Australia’s largest pastoral landholders, controlling about 26,000sq km of country in Queensland and NSW.

The company sold an increased number of cattle last year as a result of the Walhallow transaction and because of tougher conditions in northern Australia, as well as taking advantage of record prices later in the year. Overall livestock numbers at December 31 were 111,353 cattle and 202,923 sheep, down from the previous year’s 183,049 cattle and 170,926 sheep. Total crop and livestock value as of December was $68m, up from $66m a year earlier.

Chief executive officer Jock Whittle said last year’s result was a reflection of management decisions made over the past three years – particularly in the company’s Queensland operations, which had been heavily challenged by seasonal conditions.

“The 2012-13 financial year was the first bad one, season wise, and we had quite a lot of livestock around us in the Queensland operations at that time,” Mr Whittle said.

“We could see that the market was likely to correct at some point, and did a lot of work to ensure that we kept the right stock in the business. We didn’t have a lot of grass, but we basically held a lot of our numbers through until the market did move significantly, and we were able to capitalise on that,” he said.

“Commodity prices have certainly been favourable, but you still have to execute your livestock plans to be able to turn them into profit.”

Another factor in last year’s result was that Paraway’s southern and northern NSW pastoral assets were not as climatically challenged as those in Queensland, helping offset the difficult circumstances north of the border. Also the company had tended to sell stock off its NSW operations in the second half of the year, after the livestock market started to climb.

Sheep, wool and cropping operations had all made great contributions to last year’s result, Mr Whittle said.

Better season in most parts of Qld

Despite the generally disappointing wet season across large areas of the north last summer, Mr Whittle said four of Paraway’s five large northern grazing holdings were enjoying above average seasonal conditions.

“The properties in the Gulf and on Davenport Downs in the Channel Country all look really good,” he said. “The Diamantina has had a fantastic run, as well as some local rain, so Davenport looks good. Malvern Hills at Blackall is the only exception.”

Paraway’s $100m sale of its Walhallow Station in the Northern Territory to retail billionaire Brett Blundy would have little impact on the production systems used across the business, Mr Whittle said.

“We formed a view over time that Walhallow was really a stand-alone property, given its location and the strength of the live export market, so it’s removal has not meant any significant impact on the rest of the operations,” he said.

During the year the Macquarie fund, for which Paraway is the operating company, reached its eighth-year anniversary and its investors, chief of which is the Dutch pension fund Stichting Pensioenfonds ABP, voted for a restructure allowing it to expand its mandate and increase its size.

The fund has also changed from a closed to an open-ended fund and will no longer receive fees for transactions as it has done in the past.

During the year the company acquired the 31,000ha Ulonga Station in NSW and the 27,000ha Rosevale as well as the 2400ha Beckworth Court in Victoria and the 1620ha Wiranya. Other properties are also in various stages of acquisition. As part of its growth strategy, proceeds from the sale of Walhallow will be used for further acquisition, Macquarie told the corporate regulator.

“We’re certainly active in the marketplace, looking to acquire the right assets to complement the portfolio, at the right price,” Mr Whittle told Beef Central.

In creating further independence from parent company, Macquarie, Paraway shifted its operational headquarters during the year to Orange, in country NSW, which is now the base for head-office staff.

Joining the Paraway board during the past 12 months was former banker, Mike Carroll, previously a director of Meat & Livestock Australia. He replaced Graham Peart, who finished up in March last year.

 

 

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  1. Bill McGuinness, 11/04/2016

    I big congratulations to all the team at Paraway for a job well done. I am sure it can only go one way now for you and that is up and up.

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