Macquarie Group’s Paraway Pastoral, one of Australia’s top five landowners with total combined holdings of 3.6 million hectares, has avoided a fund management takeover play after posting a $23 million profit for the 2014 year on stronger cattle prices and higher land and water values. This is the first profitable year since 2011 for Paraway which operates 17 integrated pastoral businesses running 183,000 head of cattle for the Macquarie Pastoral Fund.
It has been a volatile year for the company. Elizabeth O’Leary was appointed the new head of agriculture, tasked with convincing clients to not remove the investment bank from its management role when the fund reaches its eight year anniversary this July. The company’s results statement notes that management has spoken with investors, particularly with key investor, Dutch pension fund, Stichting Pensioenfonds ABP, confirming that they remain supportive of Macquarie.
Although revenue declined from $81 million in 2013 to 70 million in 2014, Paraway has accomplished an impressive $100 million turnaround in pre-tax profit – from a $66 million loss in 2013 to $33 million profit in 2014. Part of the $23 million after-tax profit was due to a $13 million increase in carryover value of its land and water holdings, which jumped from $379.5 million in December 2013 to $397 million in December 2014. Gross margins improved from $37 million in 2013 to $59 million in 2014, and farming costs were reduced to $19 million from $26 million year on year.
As part of its strategy to hold breeding stock as a hedge – waiting for cattle prices to climb on a shrinking Australian cattle herd, Paraway sold less cattle last year compared to 2013, selling just over 64,000 head for 2014. The company, which operates the Pooginook sheep station, also sold 112,000 head of sheep, and more than 1 million tons of wool.
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