Loss-making Rifa Salutary up for sale as drought bites
China-owned Rifa Salutary has put its entire agricultural production business, including its 44,000 hectare farming portfolio, up for sale after plunging to a big loss in the past financial year as it succumbs to drought.
Price expectations are in excess of $150 million for Rifa’s lamb and beef export business, which comprises 14 properties on the east coast, consolidated into five main operational hubs.
The company’s decision to quit Australia will reignite debate about foreign ownership of prime Australian agricultural land, given its decision to quit during tougher times rather than make a long-term commitment and weather seasonal conditions.
Accounts filed with ASIC for the year to March 2019 show the company, a subsidiary of Chinese manufacturing and investment giant Zhejiang Rifa Holding Group, recorded a $12.4 million after-tax loss in the year to March 2019 which it said was “mainly due to the ongoing drought conditions experienced across Australia”.
It was the second successive loss-making year for Rifa Salutary, but a 359 per cent increase on the $2.7 million loss recorded in the 2018 financial year.
The business peaked in 2017 when it recorded net profit of $7.23 million at a time when beef prices had also spiked.
Drought conditions were a contributing factor to the recent collapse of another major beef producer, Ceres Ag, which was placed in administration in March.
Rifa Salutary entered the Australian market in 2014, where it quickly accumulated a large pastoral portfolio to breed and fatten beef and lamb for export to China.
Rifa’s portfolio includes the 2405 hectare Blackwood Station in Victoria’s Western District; the 4390 hectare Kulwin Park Station in the Southern Mallee; the 23,977 hectare Cooplacurripa Station east of Nowendoc; the 4391 hectare Ashleigh Station in Gravesend; and the 8613 hecare Middlebrook Station in northern NSW near Nundle
Bobby Jiang, director of Rifa Salutary and vice president of Rifa Holding Group, said the company felt the time was right to “capture value as a result of completed targeted capital expenditure and improvement programs across the portfolio, as well as underlying value growth”.
Selling agent Danny Thomas from CBRE Agribusiness said the business had demonstrated “excellent resilience through some difficult climatic conditions in the past two years”.
“The maintenance of great genetics across the operation’s 20,000 head of beef cattle during this period is testament to the team managing this portfolio,” Mr Thomas said
The latest accounts show the business has deteriorated sharply with revenue from customer contracts amounting to just $1.8 million in the year to March compared with $7.3 million in the 2018 financial year while cattle, sheep and cropping costs more than doubled to $9.8 million.
Losses before tax soared to almost $18 million (compared to $4.6 million in 2018) with total current assets amounting to just $5.2 million versus total current liabilities of $97.6 million including loans of almost $96 million.
Its borrowings comprise a $58 million loan to its parent company and a $36 million loan to the Commonwealth Bank, which was renewed until 2022.
According to the accounts, Rifa’s property portfolio including buildings and equipment has a net book value of $133 million while its cattle is valued at $16.7 million and sheep and cropping just over $900,000
The accounts note that Zhejiang Rifa Holding Group has taken on the responsibility of providing “sufficient financial assistance to the group as and when it is needed to enable the group to continue its operations and fulfil all of its financial obligations in the future”.
