Queensland Sugar backs Australian Cane Farm’s expansion plans

“We’re like a QE2 among [the 900] small farming enterprises operating in the Burdekin,” Mr Kirby told The Australian Financial Review.

To supercharge its next growth phase, ACF has secured a $20 million investment from not-for-profit Queensland Sugar Limited (for a 20 per cent stake in ACF) on top of an earlier $35 million equity raising supported by existing shareholders and family offices.

An ageing industry

QSL, which is jointly owned by sugar cane growers and millers, is Australia’s largest sugar marketer. The investment in ACF is its first in sugar production at the farmgate level.

’The problem we have in the sugar industry is that a lot of farmland is going out of cane, while some that is still growing cane is not as productive. Plus, there are a lot of old farmers in the industry,” QSL chief executive Greg Beashel said.

“Our investment in ACF solves some of those issues, and we also hope to make money out of it.”

Of all the groups QSL considered for investment, ACF was the only one that was “investor ready”, Mr Beashel said.

“We undertook six months of due diligence, but it was a worthwhile thing to do.

“We sat down with the ACF board and Steve, and looked at their farms and the acquisitions they are doing. They are keeping land in the industry and growing cane productively. Economies of scale are what it’s all about.”

While rising land values were one element underpinning the sector, and ensuring small growers on 50 hectares remain profitable, Mr Kirby said ACF did not consider land value growth as a major earnings piece of the business.

’We look at this as a cash business,” he said. “If our yields were at the industry average, we would get $5000 per hectare gross off a cost base of $3000 per hectare.

“But we don’t get average returns. Our returns are 15 per cent above that because we can operate at the size we do,” Mr Kirby said.

Mr Kirby said ACF hoped to announce its latest acquisitions in January or February, and was also looking to expand in other sugar cane regions, while remaining focused on the Burdekin.

Its longer-term ambitions are to hold about 6000 hectares – or 7 per cent – of the 90,000 hectares now under cane in the Burdekin.

“We’re also interested in areas like the Herbert River near Ingham, which is the next sugar region, as well as south of Mackay,” Mr Kirby said.

“They are both attractive regions for us to expand into after we bed down our partnership with QSL.”