Lease Non-Renewal Forces AAP to Farm Key Orchard, Raising Operational Risks
Australian Agricultural Projects Limited reported a $1.96 million profit for FY2025, driven by a strong olive oil harvest despite frost setbacks and rising olive oil prices. The company plans to farm a key orchard section directly after leaseholders declined renewal.
- Profit after tax rose to $1.96 million, up from $1.25 million in 2024
- 2025 olive oil harvest reached 752,600 litres despite frost damage
- Leaseholders of Victorian Olive Oil Project declined 25-year extension
- Company to farm former leased orchard area, acquiring irrigation interests
- Balance sheet strengthened with asset revaluations and liability reduction
Financial Performance and Harvest Highlights
Australian Agricultural Projects Limited (ASX – AAP) has delivered a solid financial performance for the year ended 30 June 2025, posting a profit after tax of $1.96 million. This result aligns with management expectations and reflects a significant increase from the prior year’s $1.25 million. The company’s revenue growth was underpinned by a 752,600 litre olive oil harvest, marking an improvement despite a frost event in September 2024 that reduced yields by over 10% in affected orchard areas.
The harvest volume, while at the lower end of expectations for an “on” year in the orchard’s biennial cycle, benefited from strong production in the Victorian Olive Oil Project II section, which escaped frost damage and achieved near-record yields. The quality of the oil also improved, with a higher proportion meeting the extra virgin olive oil standard, supporting favourable pricing under the supply agreement with Cobram Estate Limited.
Operational and Balance Sheet Developments
Operationally, the company maintained a focus on low-cost, in-house orchard management, including refurbishing harvesting equipment and expanding spare parts inventory to improve reliability. Water costs remained below average for much of the year, although prices rose towards the end of the season due to reduced rainfall and irrigation inflows.
On the balance sheet front, AAP strengthened its financial position by reducing liabilities by over $1.17 million and recording upward revaluations of both land ($452,675) and olive trees ($965,177). Net assets increased to $15.35 million, reflecting the maturation of replanted orchard areas and improved industry conditions.
Lease Expirations and Strategic Shifts
A significant development during the year was the decision by growers in the original Victorian Olive Oil Project not to extend their leases beyond the initial term, which ended on 30 June 2025. In contrast, all growers in the Victorian Olive Oil Project II opted to renew their leases for another 25 years. As a result, AAP plans to take direct control of the former leased orchard area, acquiring residual irrigation interests valued at approximately $783,750. This move signals a strategic shift, potentially allowing the company to capture more value from its assets and operations.
The company is currently in discussions with Cobram Estate regarding the extension of the olive oil supply agreement, which expires after the 2025 harvest. The outcome of these negotiations will be critical to future revenue streams.
Outlook and Future Opportunities
Looking ahead, the board remains optimistic about the company’s prospects. Increasing harvest volumes are expected as replanted trees reach full maturity, and ongoing high olive oil prices should continue to support revenue growth. Farming the former leased orchard directly may provide additional operational and financial benefits.
Beyond its core olive oil operations, AAP is exploring other agribusiness opportunities where it can leverage management expertise and generate immediate cash flows, signaling a willingness to diversify and adapt in a competitive sector.
Bottom Line?
AAP’s strategic pivot to direct orchard management and strong harvest fundamentals set the stage for a potentially transformative phase.
Questions in the middle?
- How will the acquisition of irrigation interests impact AAP’s cash flow and capital structure?
- What terms will define the renewal of the olive oil supply agreement with Cobram Estate?
- Can the company sustain high operating efficiency while expanding direct farming operations?