Macquarie's Paraway takes drought hit

07 Apr, 2014 07:50 AM
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One of Paraway's properties, Clonagh Station, is a 214,270 hectare cattle fattening station in the southern Gulf region of Queensland.
Paraway's results are closely watched by corporate and family farmers here and internationally
One of Paraway's properties, Clonagh Station, is a 214,270 hectare cattle fattening station in the southern Gulf region of Queensland.

ONE of Australia's largest rural landholders and red meat producers Macquarie Group's Paraway Pastoral has booked a $46 million loss chiefly due to land and water revaluations.

After enduring one of the toughest ever periods of drought in Queensland and the Northern Territory, Macquarie still managed to create strong cash flows and significantly reduce debt from $41 million to $22 million.

Paraway's results are closely watched by corporate and family farmers both in Australia and internationally for operating performance and as a gauge to land and water values in Australia. Paraway's property portfolio of 3.6 million hectares spans from the far north of Australia through to the Murrumbidgee in the Riverina, NSW.

In 2012 the $670 million company, whose parent is the Macquarie Pastoral Fund, saw the value of its overall properties drop $27 million.

Soon after, the North Australian Pastoral Company backed by London-listed MP Evans and Consolidated Pastoral backed by London-based private equity company, Terra Firma, also booked drops in property values.

In the 12 months to December 2013, Paraway saw the value of its properties written down by $43 million bringing its total property plant and equipment to $446 million.

Water licences, which were valued by Opteon and Colliers International, took a $7.5 million hit, bringing the fair value of Paraway's overall water licences to $21.3 million.

While Macquarie has declined to comment on the results, The Australian Financial Review has obtained the company's accounts filed with the corporate regulator.

"There are a limited range of recent sales of comparable properties," the accounts said. Higher price

"If the sale value of comparable properties at the higher or lower end of those assessed as comparable were used then this could result in land valuations that could differ by more than or less than 50 per cent."

Valuer Taylor Byrne provided independent evidence that the integration of a cattle station portfolio could contract a higher price than individual properties. On that basis Paraway's northern property portfolio, which includes the 1.1 million hectare Davenport Downs, was assigned goodwill of $3 million and a carrying value of $211 million. While Paraway's property values will be the talk of the cattle sector, the fund's overall strategy during the difficult 2013 year is also likely to be subject of much discussion.

Paraway moved early to sell cattle last year betting that prices would slide and an oversupply would become an issue mainly due to the drought.

According to market data obtained by the Financial Review, Paraway sold off 32,701 head of cattle between January 1 and April 30, 2013. Later in the year as the live export trade started to rebound with Indonesia Paraway was quick to respond and sold almost 18,000 head of cattle into that market.

Overall Paraway sold $75 million worth of livestock in 2013, up from $61 million in the previous year.

According to the financial statements Paraway's total livestock numbers now sit at 368,053 down from 417, 550 in the previous year. The closing market value on livestock as of December 2013 was $127.6 million. Paraway spent $1.9 million on supplements for its cattle during the drought.

Professional and employee expenses dropped to $8 million from $8.7 million and fees to Macquarie also dropped to $9.4 million from $10.2 million in the previous year.

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READER COMMENTS

RWH
7/04/2014 9:41:17 AM

Some interesting figures here, and not surprised that McBank won't comment. Income of $75m and fees to McBank of $9.4m is a pretty good return for them, maybe not for investors. Even without any operating costs, assuming a $670m investment investors are getting an 8.6% cash yield with falling asset values (if they could actually realise the assets). Would be an interesting article to compare performance against top quartile family farms to see whether Pitt St can do it better - me thinks not. Some open disclosure would be great Macquarie, but highly unlikely unfortunately
Top Ender
8/04/2014 7:27:33 AM

"Valuer Taylor Byrne provided independent evidence that the integration of a cattle station portfolio could contract a higher price than individual properties.On that basis Paraway's northern property portfolio, which includes the 1.1 million hectare Davenport Downs, was assigned goodwill of $3 million and a carrying value of $211 million." Valuer is hardly independent when Paraway is paying them. Also since when has a cattle station value ever included a "goodwill" portion in its valuation?

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