Chances are you have a bottle of it in your pantry, or drizzled it over the salad that accompanied last night’s dinner, but you probably didn’t know that Cobram Estate Olives (ASX: CBO) is a listed company, with a market cap of $609 million…. Apparently olives are big business.
With over 2.4 million olive trees across central and north-west Victoria and further abroad in California, USA, Cobram is a prolific producer and exporter of olive oil, supplying over seventeen markets.
Cobram has today announced the completion of their 2022 harvest which yielded 9.5 million litres of olive oil, a 53% increase from their previous lower-yielding crop year in 2020 which delivered only 6.2 million litres. (Olive oil is only harvested on a biennial basis.)
The extra yield has been attributed to the ongoing maturity of the Company’s olive groves, improved management and agriculture practices and favourable conditions leading to a stellar growing season. The Company also notes their investment in ‘frost fans’ as a significant factor in increasing yield by protecting the crop from cold related damage.
Increased rainfall during the harvest season saw the introduction of several operational challenges for workers however, due to effective management this did not affect the harvest, or oil quality.
Sales across the Company’s markets have remained strong (I mean, it’s olive oil… a staple in any good cook’s kitchen if you ask me), however, things look to be tipping the other way with demand beginning to outstrip supply, especially in the US where olive supply in California has been limited. Cobram’s product constraints in country have seen them attempt to secure a bulk supply of oil from a third party. Unfortunately, they haven’t been able to lock anything in as of yet meaning that US sales for FY22 will be significantly lower than last year, resulting in a full year EBITDA loss for US operations. The Company does however, expect this supply issue to resolve in the next 18 months as their Californian groves mature. Discussions are underway with grocery stores and retail outlets in the US to lift prices, offsetting supply related cost increases.
Despite rising inflationary pressures, Cobram has managed to avoid serious price hikes on their products in Australia due to lower than average water costs.
As a sustainability focussed agriculture company, Cobram has had independent evaluations carried out on the carbon footprint of their Australian operations which revealed that carbon sinks created by their olive groves have entirely offset emissions associated with production. In fact, the Company is “able to sink more carbon than it emits” which is hugely positive. The Company remains committed to further improve their carbon footprint.
For the first half of FY22 the Company reported a half-year EBITDA of $4.8 million, a 109% improvement on the prior year. This was preceded by a $50 million equity placement conducted in December 2021 of which $35 million has been earmarked for further development of Californian olive groves to meet US demand as the food service industry bounces back from COVID related closures.
Samantha Freidin is a business journalist at Emerald Financial whilst also completing a Masters of Marketing and Digital Communications at Monash University.
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