Sept 2023 Quarterly Report for the AAM Diversified Agriculture Fund
The September 2023 Quarterly Report for the AAM Diversified Agriculture Fund (ADAF) was released a few weeks ago and I have summarised the key points below.
Reduced distribution of 0.29 cents per unit (cpu) for the quarter, which was largely on the back of challenging market conditions across beef and sheep supply chains particularly in Northern Australia.
The unit price has declined by 5% from $1.30 to $1.23 mainly due to the decline in value of the cattle herd (ADAF carries more than 100,000 head of cattle).
The following graph shows the historical unit price and income:
Cattle prices more than halved in the first 9 months of this year, however, there has since been a recovery as shown in the following graph:
Management is focusing on herd genetic improvement (50% complete) and capturing more value beyond the farm gate which should increase the expected profitability of total beef and lamb supply chains.
Have been prioritising acquisitions and partnerships that deliver more integration, control and price influence.
Remain confident in the fundamentals of both the domestic and global markets. Prices expected to moderate and improve over the coming quarters.
Accretive Acquisitions
ADAF executed on a further timber supply chain opportunity in the Mount Gambier to be known as AAM Timber - Yahl
In late October, the ADAF portfolio acquired its first poultry enterprise in Southeast Queensland that will increase production in this portfolio segment by approximately 1.8 million birds per annum.
These investments, along with others in late-stage due diligence, are targeted at increasing yield to investors on a quarterly basis.
Sunshine Farms EOI
Closed in early October with encouraging support from interested buyers. Will update further when negotiations finalised.
If sale process successful use of proceeds would be used to reduce portfolio gearing and deliver yield and portfolio accretive “bolt on” acquisitions.
An update on FY 24 and FY25 expected earnings will be forthcoming in early December.
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