Cobram Estate Faces Cost Pressures Despite California Olive Ranch Buyout

Strategic Acquisition Strengthens US Footprint

Cobram Estate Olives Limited (ASX – CBO) has taken a decisive step to cement its position in the global olive oil market by entering into a binding agreement to acquire California Olive Ranch, Inc. (COR), the leading producer and marketer of Californian extra virgin olive oil. The US$173.5 million deal, comprising cash, vendor notes, and an earn-out component, is set to nearly double CBO's Californian olive grove footprint, expanding it from approximately 1,422 hectares to around 3,292 hectares.

California Olive Ranch operates a vertically integrated business model, managing nearly 1,870 hectares of groves directly and over 2,500 hectares through contracted third-party growers. This acquisition not only adds scale but also brings premium brands, including the #1 selling Californian EVOO brand in the US, under CBO’s umbrella.

Financial Upside and Synergy Potential

Forecasts for COR in FY2026 anticipate net revenues of approximately US$150 million and EBITDA of US$16 million before synergies. CBO projects synergies of US$12 million in the first full year of ownership (FY2027), rising to over US$20 million annually by FY2030. These efficiencies are expected to come from improved olive oil yields, reduced grove costs, and streamlined corporate operations.

Importantly, the acquisition is expected to be accretive to earnings per share by around 9% from FY2027, signaling a clear financial benefit for shareholders. CBO’s Chair, Rob McGavin, highlighted the strategic fit and cultural alignment between the two companies, as well as the opportunity to leverage CBO’s proprietary Oliv.iQ® and Modern Olives® technologies to unlock further value.

Operational Highlights and Market Conditions

On the operational front, CBO has secured a 27% increase in olive oil supply for FY2026, totaling 3.8 million litres, ensuring strong continuity for its brands and customers. Production volumes remained steady year-on-year, with a notable increase in output from CBO’s own groves, reflecting the maturation of its orchards and the benefits of its advanced cultivation systems.

However, the company cautioned that first-half FY2026 EBITDA is expected to be $7 million to $10 million lower than the prior year, primarily due to higher costs associated with opportunistic spot oil purchases and elevated water prices in Australia. Water costs remain a significant factor, with prices well above long-term averages, impacting operating expenses.

Outlook and Agricultural Conditions

Looking ahead, the FY2026 Australian olive crop is forecast to be moderately lower than FY2025 but remains in good condition, supported by favorable seasonal factors and the increasing maturity of the groves. Cobram Estate’s flagship brand continues to demonstrate revenue growth, underscoring strong consumer recognition of its quality and health benefits.

While global olive oil supply and pricing are normalizing, and promotional discounting is returning to historical levels, CBO expects packaged goods sales in the first half of FY2026 to be broadly in line with last year’s record results. The company’s integrated approach and expanded scale position it well to navigate these market dynamics.