AGRIBUSINESS giant, Ruralco Holdings Limited, has been granted a trading halt on the Australian Stock Exchange (ASX) while it adds to its portfolio of irrigation holdings with the acquisition of Irrigation Tasmania, Mildura Irrigation Centre in north-west Victoria and River Rain in South Australia.
The company’s strategic rationale for its acquisition of water services includes:
- The agricultural sector consumes more than 62 per cent of water in Australia, irrigation uses 90pc of agricultural volume;
- The price of water is increasingly volatile; – over the two years to 2016, for example, the value of water entitlements held for consumptive use in the southern Murray Darling Basin doubled to $11.5 billion;
- Water sector funding is underpinned by significant government and private investment;
- On-farm water infrastructure investment represents an opportunity for farmers to intensify operations and become more productive. This typically requires a greater value of inputs, the greater yields mean more outputs available for marketing (benefitting Ruralco’s core Rural Services and Agency businesses).
- Investment in water businesses has the potential to reduce the cyclical impact of rainfall and drought events on earnings, allows Ruralco to capture a greater share of wallet in a higher margin category and represents a significant competitive advantage between Ruralco and its peers.
Ruralco has also moved to acquire Sid Newham Rural Supplies in Bathurst, NSW, adding to earlier moves to expand its rural services portfolio with the takeover of Tasmanian rural merchant, TP Jones and Co, and Great Northern Rural Services at Geraldton in WA.
“We are pleased to have secured a portfolio of high quality businesses aligned with our Future Farming Strategy on attractive acquisition metrics,” Ruralco CEO and managing director, Travis Dillon, said.
“Ruralco is well positioned to grow the business, with the focus remaining on balancing the execution of strategy with improvements in operating leverage to ensure increased shareholder returns.”
Ruralco has set out to raise up to $65 million to fund the acquisitions.
At this stage, the trading halt on the ASX will be in place until the commencement of normal trading tomorrow, Friday, February 17.