With its share price doubling in less than a year, the country’s largest olive oil producer and processor, Boundary Bend, is looking to “go for growth” with a large fund raising which could see it boost volumes significantly over the next few years.
Boundary Bend has taken on the cheap European imports of low quality olive oil with its Cobram Estate and Red Island brands and emerged with a significant share of the local market.
Boundary Bend co-founders Paul Riordan (left) and Rob McGavin, at one of the Victorian storage facilities for Cobram Estate extra virgin olive oil. Photo: Christian Pearson
Now, it is seeking to consolidate its position in the market by advancing negotiations for a significant capital raising to fund a new plantation on acreage acquired at Gol Gol, near Mildura. Even though it would take several years to plant and to maximise output from the acreage, it could add as much as 50 per cent to the olive oil group’s volumes once it is fully planted and the olive trees reach maturity.
“Long-term, patient, Australian investors” is what Boundary Bend is looking for, ideally a patient superfund and definitely not private equity,” says the company’s co-founder and driving force, Rob McGavin.
The new acreage to be planted out would run to around 3000 hectares in total.
The new plantation is likely to cost close to $100 million to bring it into full production, which would take several years, with the initial plantings likely from 2019, he said. Negotiations are advanced, but unless it can find the right partner, the raising will not proceed, he said.
The new acreage to be planted out would run to around 3000 hectares in total and would give the olive oil producer and processor a growth platform for the medium term.
The negotiations come after a surge in the company’s share price, from around $4 a share in mid-2016, to $8 earlier this year, according to the most recent dealings in shares in the company’s shares which trade infrequently.
Even so, with the replacement value of the assets worth an estimated $9 a share, McGavin reckons.
“It’s been a long journey, but I feel the shares are undervalued. The board also feels the shares are worth more,” he said.
The spike in the share price comes as the global price for olive oil has been lifted by under-investment in new production due to several years of weak prices, even though demand has continued to grow.
“There is a crunch coming,” Boundary Bend’s McGavin says, with inventory levels worldwide at low levels due to the lack of investment.
The last big fund raising by Boundary Bend in mid-2017 saw Chris Corrigan buy in.
Corrigan is better known for taking on the waterfront unions in the 1990s, but who is also a large investor in the rural sector, most notably via Websters, the walnut producer based in Tasmania, where Corrigan has a 13 per cent holding.
That placement raised $8.8 million which was to kick-start the company’s expansion into the US where its locally harvested product is being rolled out on supermarket shelves across the US west coast from a plant north-west of San Francisco.
At present, Boundary Bend has only around three-quarters of its groves in full production with around 15 per cent yet to mature.