Webster battens down for drought battle and posts $9m loss

Webster posts $9m loss as drought hits cotton and livestock

Agribusiness
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Diverse farming business Webster Limited blames the big dry and a drop in global walnut markets for profit slump

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Large-scale farming business, Webster Limited, has spent $1.1 million building drought feeding lots to preserve its much-diminished Dorper meat sheep flock.

It is also cutting summer cotton plantings to just a tenth of its 2017-18 area as deepening drought conditions slash full-year profit results to a $9.1m loss.

The net loss after tax for the year to September 30 was down from a $27.1m profit in 2017-18.

The diverse agribusiness, part owned and chaired by former ports and logistics business boss, Chris Corrigan, and with operations in South West NSW, Tasmania and South Australia, has blamed extensive drought and a 20 per cent drop in walnut market values for its profit slump.

The nut, broadacre row crop, sheep and beef producer has also forecast "another challenging year" ahead, and budgeted to spend about $1.5m on drought feeding costs.

Webster's Far Western NSW Dorper flock at Packsaddle Station before being relocated to drought containment lots at near Menindee Lakes.

Webster's Far Western NSW Dorper flock at Packsaddle Station before being relocated to drought containment lots at near Menindee Lakes.

Cattle numbers have been halved in the past six weeks, and since July the meat sheep flock has centralised at specially-built containment lots near Menindee in western NSW.

"The ongoing drought has resulted in challenging operating and trading conditions which have impacted our financial performance in 2019," said chief executive officer, Maurice Felizzi.

However, drought had also sent the value of the company's water entitlements soaring.

The 167,214 megalitre portfolio, listed on its accounts as worth $186m, had an estimated current market value of about $410m on September 30.

We are focused on de-stocking and adjusting livestock levels for available feed and managing our resources as efficiently as possible - Maurice Felizzi, Webster Limited

Webster is currently the focus of a foreign takeover bid by its biggest shareholder, the Canadian Public Sector Pension Investment Board, which would see its subsidiaries PSP BidCo and Sooke Investments pay $2 a share for the remaining 80.9pc of the business.

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The takeover offer, which values the company at about $854m, will see a scheme of arrangement documents sent to shareholders in mid-December and a vote in early February.

Directors not aligned with PSP have unanimously supported the takeover offer.

Sustaining long term growth

In the meantime, Mr Felizzi said Webster's priority was to manage through the current difficult dry conditions and continue investing for sustainable longer term growth.

"We are focused on de-stocking and adjusting livestock levels for available feed and managing our resources as efficiently as possible," he said.

"However, we continue to strengthen our asset base with permanent walnut and almond plantings across our core property holdings.

"Combined with our water allocation, they ensure Webster remains in a strong position for sustainable growth over the longer term."

The company had focused on converting its extensive water assets into "valuable horticulture and agricultural products" which it believed was likely to provide shareholders with a higher return on their funds in the medium to long term.

Cotton shrinks

Low water allocations meant its total cotton crop area was down to about 1900 hectares this summer, or less than half last summer's drought-reduced planting, and way down on the 17,162ha picked in 2018 when Webster was still lakebed farming at Lake Tandou and on its Bengerang aggregation in North West NSW.

Bengerang was sold to former shareholders Australian Food and Fibre for $133m a year ago.

Webster's end of year loss followed a 46pc drop in half-year net profit to $2.1m.

Revenue for the year slipped from $207.3m to $154m, despite a slight income lift to $56.1m from a bigger 9846-tonne walnut harvest in Tasmania and NSW.

However, overall profits from walnuts and almonds fell from the previous year's $10.7m to $6.6m, mainly because global oversupply cut average walnut prices about 20pc.

Although water costs were likely to rise, the company expected 2020 walnut yields to be marginally higher and values up considerably following weather setbacks for the huge Californian crop.

Webster has about 260ha of three- and four-year-old almond trees and 460ha of young trees, plus 3000ha of walnuts.

It grows 90pc of the Australian walnut crop, of which 40pc is exported.

Rangelands destocked

The company destocked all its rangeland grazing operations at Tandou Station, Packsaddle Station and the 180,000ha Kalabity Station on the edge of SA's Flinders Ranges over winter to prevent overgrazing and preserve core breeders in drought containment lots built during the first six months of this year.

About 21,000 ewes and lambs are now being fed in the shaded pens at Tandou, which in better years may also be used to help finish lambs for market if grazing conditions need support.

There's not a lot of experience to draw on with Dorpers in contained feeding environments, so managing them all in one spot has been a learning experience - Maurice Felizzi

As drought conditions intensified this year Webster's ewe flock was effectively halved to about 12,000.

However, Mr Felizzi said recent off-season joining success rates had been surprisingly good, at about 65pc, prompting the company to anticipate full-year lambing figures of up to 130pc in the confinement blocks.

"There's not a lot of experience to draw on with Dorpers in contained feeding environments, so managing them all in one spot has been a bit of a learning experience," he said.

"But we've achieved good selling results with the stock we've turned off and joinings have been positive."

Meanwhile, in the western Riverina at Hay and Darlington Point, the company's first cross Angus-Wagyu herd has been pruned from about 3500 breeders two years ago to 1400 cows.

Since September about 1900 young cattle and cull cows have been sold to keep drought numbers manageable over summer.

"Grazing conditions have been better in the south, but we're buying in feed, making some silage if there's water available to grow it, and have grazed some of our less successful winter cereal crops this year."

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The story Webster battens down for drought battle and posts $9m loss first appeared on Farm Online.

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