NZ Rural Land Reports 2.45 cps AFFO, Suspends FY26 Guidance

Profit Growth Overshadowed by Tenant Receivership

New Zealand Rural Land Company (NZX:NZL) delivered a 36% jump in net profit after tax to $4.7 million for the six months ending June 2026, buoyed by CPI-linked rental increases and stable portfolio performance. However, the company has suspended its full-year earnings guidance following the receivership and liquidation of Kiwi Crunch Farms, a tenant responsible for approximately 5.8% of NZL’s rental income.

Kiwi Crunch Farms, which leased kiwifruit orchards in Hawke’s Bay, entered voluntary administration in July before moving into receivership and liquidation by mid-August. The receivers have declined to adopt existing lease agreements, leaving NZL to engage with alternative tenants and potential purchasers for the affected properties. As of 30 June, Kiwi Crunch Farms owed NZL around $0.7 million in rent, with the ultimate financial impact still uncertain pending recovery and lease replacements.

Stable Portfolio and Rental Growth Cushion Impact

Despite the tenant disruption, NZL’s portfolio remains steady at 17,077 hectares, spread across pastoral, horticulture, and forestry assets. The company recently completed the $8.5 million purchase of a 79-hectare horticultural property in Central Otago from SI Orchards, adding 4.6% to its annual rental income and subject to a 30-year lease.

Rental income benefited from inflation-linked lease reviews, with a notable 17.3% CPI increase applied to 7.3% of pastoral leases in June 2026, and a further 3.1% uplift on 30.3% of the portfolio earlier in the year. These adjustments contributed to a 1.7% increase in total lease value, supporting NZL’s adjusted funds from operations (AFFO) of $3.6 million, or 2.45 cents per share.

Financial Position and Capital Management

NZL’s gearing ratio edged up slightly to 30.4%, with total drawn debt at $137.5 million. The company renewed $56.5 million of banking facilities, extending maturities and increasing the weighted average term to expiry to 2.3 years. Interest rate hedging remains robust at 91% of borrowings, with a weighted average cost of debt of 5.4%.

The company declared a quarterly dividend of 1.34 cents per share in May and resolved to pay a second quarterly dividend of the same amount, bringing total HY26 dividends to 2.68 cents per share. This aligns with NZL’s revised dividend policy targeting distributions of 90-100% of AFFO, designed to enhance shareholder predictability and transparency. The Dividend Reinvestment Plan will be applied dynamically, with no DRP participation for the upcoming dividend.

Sustainability and Portfolio Resilience

NZL continues to embed climate risk considerations into its strategy, with a transition plan targeting a 45.5% reduction in absolute emissions by 2035. Its Enduring Land for Life sustainability framework prioritises biodiversity, native regeneration, and carbon sequestration initiatives, including partnerships with forestry tenants. Climate scenario analyses reaffirm the value of NZL’s diversified portfolio across regions and agricultural sub-sectors in mitigating risks such as water stress and extreme weather.

While the Kiwi Crunch Farms liquidation injects uncertainty into NZL’s near-term outlook, the company’s diversified lease portfolio, inflation-linked rents, and ongoing capital management provide buffers. The market will be watching closely for updates on tenant replacements and any adjustments to earnings guidance as the situation evolves.