Irrigation Rights Purchase Poses New Financial Challenge for Australian Agricultural Projects
Australian Agricultural Projects Limited reported a strong 18% revenue increase and a 56% jump in net profit for FY2025, while preparing to directly manage a key orchard segment after lease changes.
- 18% revenue growth to $5.6 million
- 56% net profit increase to $1.96 million
- No dividends declared for FY2025
- Direct management of 285-hectare orchard segment from July 2025
- Purchase of irrigation rights estimated at $783,780
Financial Performance Highlights
Australian Agricultural Projects Limited (AAP) has delivered a robust financial performance for the year ended 30 June 2025, with revenue rising 18% to $5.6 million and net profit after tax surging 56% to nearly $2 million. This marks a significant improvement over the prior year, driven by higher production sharing income and a notable revaluation of its olive trees and investment property.
The company’s earnings per share increased to 0.53 cents, up from 0.37 cents in FY2024, reflecting improved profitability despite no dividends being declared. Net tangible asset backing per share also rose to 4.16 cents, underscoring a stronger balance sheet position.
Operational Developments and Strategic Shift
A key operational update is the decision to directly manage a 285-hectare portion of the Victorian Olive Oil Project orchard from 1 July 2025. This follows growers in the managed investment scheme opting not to extend their lease beyond 30 June 2025. The company anticipates generating revenues from olive oil sales that will exceed operating costs for this segment.
However, this strategic move requires AAP to purchase residual irrigation rights from the growers at an estimated cost of $783,780. The company plans to fund this acquisition from operating cash flows, which will be an important factor to monitor in the coming months.
Balance Sheet and Financing
At year-end, total assets increased to $23.9 million, supported by a revaluation of bearer plants and investment property. Net assets rose to $15.3 million, reflecting retained earnings growth. Loans and borrowings decreased slightly to $6 million, with a mix of secured bank facilities, equipment finance, and shareholder loans. The company maintains manageable debt levels with no significant covenant constraints, providing financial flexibility.
Cash and cash equivalents remained steady at around $450,000, despite a net cash outflow from financing activities related to loan repayments. Operating cash flow was positive at $930,000, a marked turnaround from the prior year’s cash outflow, indicating improved operational efficiency.
Outlook and Considerations
While the company’s financial results are yet to be audited, the strong profit growth and strategic shift to direct orchard management signal a potentially transformative phase for AAP. The purchase of irrigation rights and the operational integration of the orchard segment will be critical to watch, as they could impact cash flow and profitability in the near term.
Management continues to earn lease and management fees from other projects, maintaining diversified income streams. Investors will be keen to see how these developments translate into sustained earnings growth and whether the company will resume dividend payments in future periods.
Bottom Line?
AAP’s pivot to direct orchard management marks a new chapter, with financial discipline and operational execution set to define its next growth phase.
Questions in the middle?
- How will the irrigation rights purchase impact AAP’s cash flow and liquidity?
- What operational efficiencies can be achieved by managing the orchard segment directly?
- Will the company consider resuming dividends as profitability strengthens?
