Australian Agricultural Projects Ltd reports a robust quarter with healthy orchard growth and forecasts a significant increase in olive oil production for 2025, alongside strategic lease renewal initiatives.
- 2025 harvest forecast between 750,000 and 825,000 litres, up from 551,500 litres in 2024
- Orchard showing strong new growth despite September frost impact
- Surplus operating cash flow of $385,000 for Q2 and $1.7 million year-to-date
- Debt reduction of $1.6 million against NAB facility and $127,000 in shareholder loans
- Grower leases expiring June 2025 with 25-year renewal options underway
Robust Orchard Growth Sets Stage for Record Harvest
Australian Agricultural Projects Ltd (AAP) has delivered a promising update for the quarter ended 31 December 2024, highlighting strong orchard health and a harvest outlook that significantly surpasses last year’s output. Despite a frost event in September that affected some orchard areas, the company reports vigorous new growth and a flowering peak in early November under favourable climatic conditions.
Management anticipates the 2025 olive oil harvest to reach between 750,000 and 825,000 litres, a substantial increase from the 551,500 litres harvested in 2024. This surge aligns with the orchard’s biennial production cycle, marking 2025 as an "on" year, and reflects the maturation of trees planted since the replanting programme began in 2018. The full commercial production of the orchard for the first time since replanting underscores the company’s growth trajectory.
Financial Discipline and Debt Reduction
Financially, AAP has maintained a positive operating cash flow, reporting a surplus of $385,000 for the quarter and $1.7 million for the first half of the financial year. Cash receipts of $1.7 million for the quarter align with management’s expectations and benefit from elevated bulk olive oil prices. The company prudently applied $1.6 million of these surplus funds to reduce its principal debt facility with National Australia Bank, lowering the facility limit to just over $5 million while keeping the balance available for redraw.
Additionally, shareholder loans were trimmed by $127,000 during the quarter, signaling ongoing efforts to strengthen the balance sheet. Operating expenses remain consistent with budget forecasts, and payments to related parties reflect standard remuneration and secretarial fees.
Lease Renewals to Secure Long-Term Production
Looking ahead, AAP faces a critical juncture with the first term of grower leases expiring on 30 June 2025. These leases underpin the company’s managed projects and include options for 25-year renewals. The company plans to engage growers shortly to facilitate lease renewals, which will be essential to securing long-term orchard operations and sustaining production growth.
The lease renewal process will be closely watched by investors, as it directly impacts the company’s operational stability and future revenue streams. Successful renewals could further underpin confidence in AAP’s growth prospects as the orchard matures and yields increase.
Outlook and Market Position
AAP’s combination of improved orchard productivity, disciplined financial management, and proactive lease strategy positions it well in the competitive olive oil sector. The company’s ability to convert its strong growth potential into realised production and cash flow will be critical in the coming quarters.
Investors should monitor the actual harvest results against forecasts and the progress of lease renewals, which will provide clearer signals on the sustainability of this growth phase. With debt levels decreasing and cash flow positive, AAP appears to be navigating its operational and financial challenges with measured confidence.
Bottom Line?
As Australian Agricultural Projects prepares for a record harvest and lease renewals, the next quarters will test its ability to convert growth into sustained profitability.
Questions in the middle?
- Will the actual 2025 harvest meet or exceed the optimistic forecast given frost-affected areas?
- How smoothly will the lease renewal process proceed with growers, and what terms will be negotiated?
- What impact will fluctuating bulk olive oil prices have on future cash flows and profitability?