Rare Foods Australia Boosts Biomass and Cuts Costs Amid Market Challenges

Biomass Recovery Signals Operational Resilience

Rare Foods Australia (ASX: RFA) has reported a significant 18% increase in its abalone biomass, reaching 196 tonnes as at 31 December 2024. This recovery follows a dip attributed to reduced juvenile abalone deployments during the COVID-19 pandemic, with the company now confident that its 7-year Ranch Management Strategy is driving sustainable growth in its core aquaculture operations.

The biannual biomass verification underscores the effectiveness of ongoing reef refurbishment and juvenile deployment timing, which aims to maximise juvenile survival and growth. The deployment of 1.2 million juvenile abalone in 2024 was completed on schedule, reinforcing the company’s commitment to its long-term ranching plan.

Cost Reduction Strategy Gains Traction

In response to a softening international premium abalone market, Rare Foods Australia has implemented a cost reduction program that has already yielded $440,000 in savings during the quarter. Operational expenses for Q2 were reduced by 19% compared to the prior year, despite redundancy payments tempering the full impact. The company anticipates further cost efficiencies to materialise in the coming quarter.

Negotiations with juvenile supplier 888 Abalone are ongoing to unlock additional synergies, including potential cost savings and reciprocal sales and processing services, which could further strengthen the company’s supply chain and margin profile.

Subsea Estate Brand Launch Drives Retail Growth

Rare Foods Australia has successfully launched its Subsea Estate brand, marking a pioneering step in subsea wine production in the Southern Hemisphere. The first emersion yielded over 15,000 bottles, now available through the rebranded Subsea Estate Cellar Door and a newly activated e-commerce platform.

The cellar door achieved record quarterly sales of $66,000, a 29% increase year-on-year, highlighting strong consumer interest in the unique ocean cellaring experience that combines premium abalone and subsea-aged wines. The company is actively engaging with wine distributors to expand domestic and international reach.

Financial Position Bolstered by R&D Refund

Rare Foods Australia received a record $2.1 million R&D refund from AusIndustry, reflecting its intensified investment in innovation, particularly the 7-Year Ranch Management Strategy and Ocean Cellaring initiatives. This refund was processed faster than in previous years, providing a timely boost to working capital.

Despite a 30% decline in cash receipts from operating activities compared to the prior year quarter, the combination of cost savings and the R&D refund resulted in a net positive cash flow of $0.94 million for the period. The company is currently exploring refinancing options to enhance liquidity and support ongoing operations.

Looking Ahead

Rare Foods Australia is progressing its Esperance Aquaculture Precinct project, aiming to secure federal funding for infrastructure development and attract new partners. Meanwhile, sales strategies for FY25 focus on expanding into key Asian markets including China, Japan, and Vietnam, leveraging renewed direct flight routes to support live abalone sales.

While the company’s operational and financial metrics show encouraging momentum, the non-recurring nature of the R&D refund and ongoing market softness warrant close monitoring as Rare Foods navigates its next growth phase.