Another financial year is over and some investors may be licking the wounds from one of the worst trading years since 1987, but the Agri sector has proved to be a boon for some shareholders.
Another financial year is over and some investors may be licking the wounds from one of the worst trading years since 1987, but the Agri sector has proved to be a boon for some shareholders.
The 2008 financial year saw the AAG Agri-Index record strong growth for the third year running, led by Incitec Pivot which has reported a massive jump in share price of 132 per cent since June 2007.
FY08 saw the All Ordinaries drop 15.5 per cent, whilst the AAG Agri-Index jumped by a 79.5 per cent highlighting the strong demand for Agri Listed equities.
Other companies in the top 5 included Perth-based TFS Corporation, which saw its share price climb 32 per cent since June 2007, Olea Australis gained 30 per cent and Australian Wine Holdings added 33 per cent.
Research director at AAG Tim Lee was very positive about the result.
"We have again seen the Agri sector grow, and to do so in such volatile market conditions and again outperform the All Ordinaries is a fantastic result," he said.
One of the major contributors was Incitec Pivot which doubled its market capitalisation last year to over $9 billion and is a behemoth in the Agri sector.
The AAG Agri-Index has 3 sub categories: Manufacturers, Producers and Diversified.
The Manufacturers in the index reported the strongest increase of +92% whereas the Producer Index decreased by -11.9% and the Diversified Index dropped by -16.3% (about the same as the S&P 200).
Clearly manufacturers of Agri products have driven the success in the sector this year.
Regarding the top 5 success stories Mr Lee commented "the Agri sector certainly hasn't been isolated from the volatility that has affected the rest of the market. Clover Corporation's shares increased by 18% on the 30th of June after announcing a better than expected result and Olea Australia jumped by 17% on the basis of a Capital
Return to Shareholders 1 July. The market is certainly watching agriculture closely, which is not surprising considering the attention towards the soft commodity boom."
Great Southern, one of the top performers of last year's index has done an aboutturn with its share price dropping by 78% from this time last year.
"GTP is suffering from the uncertainty surrounding the tax rulings on non-timber MIS, rather than it being a
reflection of the quality of the underlying business" said Mr Lee.
In addition Mr Lee believes that the strong price in commodities has yet to work its way through the system.
"There's a lot of uncertainty in relation to the harvest in parts of Queensland and News South Wales and some
analysts have downgraded predictions from Western Australia. That said, many companies are now positioning themselves to take advantage of increased commodity prices which won't be apparent until after harvest is concluded, say early next year. By that time I would expect to see some of the Producers in the index starting to shine."
