RFF maintained its full-year distribution guidance of 12.2¢, which includes a 0.47¢ a unit franking credit. Any shortfall between earnings and distributions will be paid out of capital profits or cash reserves.
RFF lifted adjusted funds from operations by 9 per cent to $44.2 million over the 12 months to June, although, on a per-unit basis, AFFO fell 2 per cent to 11.7¢ because of development assets not yet generating rental income.
Statutory profit surged 70 per cent to $210 million as it booked $105 million of valuation gains on its cattle assets leased to the likes of AACo and Brazilian meat giant JBS.
With prices for smaller macadamia nuts and nut fragments used as ingredients in various products fallen about 55 per cent and whole nut kernels down about 10 per cent because of COVID-induced oversupply, Mr Bryant tipped a “period of pain” that could last a couple of years.
This would affect the profitability of the small number of mature macadamia orchards that Rural Funds owns, although they will still remain profitable.
However, Mr Bryant said the fall in pricing was “largely irrelevant” or even positive for the much larger development component of RFF’s macadamia investments as these newly planted trees would come into production “when prices are back on the rise again”.
Macadamia assets accounted for just 7 per cent of RFF’s income in the 2021-22 financial year, but will account for an increasing proportion of earnings over the next few years as newly planted orchards are leased up.
As part of its results update, RFF’s manager, Rural Funds Management, said it was in exclusive leasing negotiations over new macadamia plantings at its Riverton and Rookwood farms. It expects to have planted 1000ha of orchards by November.
Looking at the cattle and almond sectors, which generate almost 80 per cent of its revenue, Mr Bryant said rising interest rates would probably dampen any further increase in values.
“There’s been a big run-up in cattle land values, but that will plateau now. It will be the same for almonds,” he said.
Mr Bryant said he expected the drought in California, a region that generates 80 per cent of the world’s almonds, to put upward pressure on prices over time.
“At the moment that’s not happening due to COVID,” he said.
On the potential for a third summer of La Niña, Mr Bryant said this would be “very good for farming industry generally speaking”, but would have no real impact on RFF’s earnings given its position as landlord.
“There’s more money in mud than dust,” Mr Bryant said.