The floods witnessed in the first half of 2022 resulted in drowning profits for diversified crop production company Duxton Farms (ASX: DBF). To bring back the revenue, the Company is relying on a range of strategies, one of which entails expanding its farm portfolio through acquisitions. In keeping with that, Duxton Farms has announced the acquisition of two Victorian properties totalling 1,183 hectares, including 935 hectares of area developed for irrigation for $9 million.
The two properties combined are known as Piambie Farms, and the transaction is split into two stages. The Company agreed to acquire the first property, “Glen Innes”, for $1.6 million, with an expected completion date in December 2022. The second transaction, “Piambie”, was acquired for $7.3 million and involves an option agreement and an operating lease to ensure ongoing working possession.
The new acquisitions are reflective of the Company’s actions to alleviate net losses of over $3 million suffered in FY22. Uncertain weather conditions and flooding in Lachlan Valley led to crop loss and delays in harvesting. It urged Duxton to expand their avenues of growth, and these new additions are expected to set off the previous impacts.
Located in northern Victoria, Piambie Farms is among the most productive agricultural regions in Australia. It is well-known for its horticultural (plant cultivation) and viticultural (wine growing) industries. Nearly 80 percent of the 935 hectares representing Piambie Farms has been developed for irrigation, which will increase the Company’s irrigable capacity by nearly one third.
At Piambie Farms, the Company intends on keeping the existing cropping programme. It won’t change up the commodities grown there for the next few seasons, but it will look at supplementing the wheat and canola crops with irrigated cotton. In the long run, the Company might use the property to depart from annual crop cultivation and into permanent horticulture.
Duxton Farms is Australia’s only listed, mixed farming enterprise. It operates a range of high-quality Australian agricultural assets to produce a variety of commodities, key among them being wheat, canola, barley, cotton and livestock.
Currently, Duxton’s score portfolio comprises eight properties spanning 22,882 hectares in the Central West of New South Wales, Sydney, and includes land developed for dryland cropping, irrigated cropping and livestock management.
The Company focuses on sustainable cropping practices, thus deploying practices like crop rotation, minimum till-farming and laser-levelled irrigation. Its aim is to bring these practices to every new acquisition, too, including Piambie Farms.
The new lease between Duxton Farms and Piambie Farms will begin in January 2023 and the option is exercisable from July 2023, which is when the Company expects the transaction to be completed. This will affect the financial statements from 2023 to 2024 financial years, but the structure of the transaction will ensure operational consistency on fair terms for both parties.
While this would be a promising venture for Duxton Farms, the transaction is conditional on receiving approval from the Foreign Investment Review Board and will be debt funded from Duxton Farm’s existing financier.
Alinda is a Business Reporter for The Sentiment
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