Cobram Estate Olives Limited (CBO) is a leading Australian food and agribusiness company with olive farm and milling operations in Australia and the USA, and a portfolio of premium brands including Cobram Estate and Red Island. CBO is Australia’s largest olive oil producer with over 2.4 million olive trees on its Australian groves and is recognised as a leader in sustainable olive farming. Cobram capped off a weather impacted year with a strong cash flow result. Sales momentum continued in Australia, growing over 20% sequentially during the second half, in part due to improving local pricing conditions.
A positive surprise came via the US operations, swinging back into positive profit. The outlook for Cobram’s US operations is positive, with growing conditions improving materially for the CY23 harvest. This should allow Cobram to capitalise on the established infrastructure, brands and distribution footprint in the large US market. The company has guided to a higher crop size in the US for FY24e and our forecasts are consistent with this profitability. Given the growth and investment program, net debt peaks in the current year and we expect the balance sheet to show reduced leverage into future periods. With asset backing above the current share price and an improving return/risk equation we have raised our share price target to $1.61 (from $1.54) and re-affirm the BUY rating.