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FTAs help boost CPC revenues ahead of capital raise

UK private equity firm Terra Firma is selling a A$300 million equity stake in its Australia beef cattle portfolio company after returning the company to profit.

Revenues at Consolidated Pastoral Company (CPC), Terra Firma’s Australian beef cattle portfolio company, increased 38 percent during the year ending March 2015, to A$88.5 million, returning the company to profit after it reported a A$26 million loss in 2014.

The results come in the wake of booming beef prices that have reached their highest level in decades, but CPC’s chief executive Troy Setter also puts the success down to recent free trade agreements between Australia and China, Japan and Korea.

“CPC is extremely well placed to benefit from the favourable industry dynamics driving global beef markets and is already seeing the benefits from recently completed Free Trade Agreements,” he said in a press release.

While beef tariffs are yet to be reduced between Australia and China, Japan and Korea under the terms of each FTA, CPC has benefited from increased positivity around the country’s beef sector including an increase in enquiries from China for long-dated forward beef contracts and co-investment, Agri Investor learned.

CPC is currently in the market with a A$300 million equity stake after hiring Barclays Capital last year to advise on the strategic and expansion capital deal. Setter told The Australian this week that the capital could be used for further acquisitions and that parts of the 10 million hectare Kidman & Co portfolio were of interest. It is understood that enquiries have been streamlined to a handful of names including one Chinese investor, according to sources familiar with the deal.

Revenues for the financial year were A$88.5 million compared to A$64 million during the same period in 2014, and earnings before interest, tax, depreciation and amortisation stood at A$22 million compared to A$0.1 million in 2014.

CPC’s acquisition of Bunda Station in February helped take the company’s portfolio to 5.7 million hectares of land and assets worth A$735 million, including operations in Indonesia.

Terra Firma paid A$425 million for a 90 percent stake in CPC in 2009 when Australian farmland prices were arguably at a peak.

The company also increased its cattle numbers by 3 percent to 384,000 head.

Other moves have been taken to shore up the business including a move to “reposition the business from a cattle producer to an integrated global beef and cattle supplier and marketer with a strong focus on the developing markets of Asia”, added Setter in a statement.