Australian Agricultural Projects Limited reported a half-year net loss driven by the end of a major lease but secured a key supply agreement extension and maintained strong cash flows.
- Half-year net loss of $797,061 after lease termination
- Cessation of Victorian Olive Oil Project lease impacts revenue recognition
- Strong operating cash flow of $1.8 million supports debt reduction
- Extended olive oil supply agreement with Cobram Estate for five more harvests
- Orchard health good with expected harvest volume increase despite climatic challenges
Financial Results Reflect Transition
Australian Agricultural Projects Limited (ASX: AAP) has reported a net loss of $797,061 for the half-year ended 31 December 2025, a reversal from the $488,714 profit recorded in the same period last year. This downturn primarily stems from the cessation of lease and management fees following the conclusion of the Victorian Olive Oil Project’s lease term on 1 July 2025.
Previously, the company earned steady income from leasing orchard land and managing the project under a managed investment scheme (MIS). With no growers renewing their leases in the original Victorian Olive Oil Project, AAP has taken over direct management and farming of this portion of the orchard, shifting its revenue recognition model and temporarily suspending lease fee income.
Operational Resilience Amid Change
Despite the loss, AAP’s operating cash flows remain robust, generating $1.8 million in the half-year, slightly up from the prior year. This cash strength has enabled the company to reduce its core debt facilities and acquire residual irrigation interests from former growers, consolidating control over the orchard assets.
The orchard itself is reported to be in good health following the 2025 harvest, with climatic conditions, though cooler and drier than usual, allowing timely operations and a promising fruit set. Management anticipates the 2026 harvest volume to be between 570,000 and 640,000 litres, an increase over the previous off-year, though they remain cautious about potential impacts on oil accumulation due to weather variability.
Strategic Contract Extension and Future Outlook
In a significant development, AAP extended its olive oil supply agreement with Cobram Estate on 23 February 2026, securing a minimum of five additional harvests under terms that link bulk oil prices to Australian retail prices. This extension provides a stable revenue channel for the company’s olive oil production, including both extra virgin and virgin oils.
The company continues to operate the Victorian Olive Oil Project II, where all growers opted to renew their leases. However, AAP is reviewing more efficient structures for this smaller MIS to reduce compliance costs and improve operational efficiency.
Accounting and Asset Reclassification
The transition from lease-based income to direct farming has led to a reclassification of orchard assets. Land and bearer plants previously recognised as investment property and biological assets are now recorded under property, plant, and equipment at cost less depreciation, reflecting the company’s direct operational control.
The company has not recognised deferred tax assets related to its accumulated losses, citing uncertainty over the timing of future profit recovery. The auditors have reviewed the financial statements without qualification, affirming compliance with accounting standards.
Bottom Line?
AAP’s shift from lease-based income to direct orchard management marks a pivotal phase, with upcoming harvest results and operational efficiencies set to define its financial trajectory.
Questions in the middle?
- How will the direct farming model impact AAP’s revenue recognition and profitability in FY2026 and beyond?
- What are the potential financial and operational implications of restructuring the Victorian Olive Oil Project II MIS?
- How might ongoing climatic conditions and rising water costs affect future harvest yields and margins?