01/07/2009 - 09:34

MIS sales down for TFS, Elders

01/07/2009 - 09:34

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Agribusiness companies TFS Corporation and Elders have reported a fall in managed investment scheme sales for the 2008-09 financial year but said they were pleased with the result in light of difficult industry conditions.

MIS sales down for TFS, Elders

Agribusiness companies TFS Corporation and Elders have reported a fall in managed investment scheme sales for the 2008-09 financial year but said they were pleased with the result in light of difficult industry conditions.

TFS, which owns and manages Indian sandalwood plantations in the Kimberley, said it had raised $51.1 million from sales of its 2009 Indian sandalwood MIS project - down 15 per cent on the $59.8 million raised in 2008 - after accepting applications for 675 hectares.

"This is a strong response from the retail market given the current domestic MIS environment," TFS said.

Timbercorp was placed in administration in April.

Earlier this week, Timbercorp creditors and grower investors voted for 41 companies within the Timbercorp group to be placed in liquidation.

Great Southern was placed in administration in May.

TFS said that, in addition to the MIS sales, it had attracted overseas institutional investment for the first time, with an application received for 350 hectares in the new 2010 Indian sandalwood plantations, worth $35 million.

"This is a significant development for TFS and represents the first investment by non-MIS investors into Indian sandalwood plantations managed by TFS," the company said.

"Going forward, we expect plantations to be funded by both MIS and non-MIS investment, with non-MIS investment playing an increasingly important role."

MIS operator, ITC, a wholly-owned subsidiary of agribusiness Elders, said it had MIS sales totalling about $24 million for 2008/09, which would fund the establishment of about 3,700 hectares of plantation.

The MIS sales were down 35 per cent from the previous financial year, which totalled $37 million.

ITC said the 2008-09 sales result was pleasing given the impact on investor confidence of the troubles surrounding Timbercorp and Great Southern, and uncertainty in financial markets.

Meanwhile, Launceston-based Forest Enterprises Australia (FEA) said sales of its managed forestry investment products for the 2008/09 year just ended had totalled about $23 million.

FEA said the collapse of Timbercorp and Great Southern had affected inflow into the managed agribusiness investment sector.

"The major driver of the managed agribusiness investment market this year was industry sentiment, following the collapse of Timbercorp Ltd and Great Southern Ltd in the June quarter," FEA said.

But FEA said its diversification into forest products processing was providing multiple revenue streams for the group and enabling it to reduce its reliance on income generated by its investments division.

"This year, revenues from timber sales and plantation establishment are expected to significantly exceed those from the 2008 full (financial) year," the company said.

FEA warned last week that sales for 2008/09 were likely to be significantly less than the $60 million achieved in 2005/06 and 2006/07, due to external factors beyond its control.

Woodchipper Gunns said its subsidiary, Gunns Plantations Ltd, had sales of about $45.5 million across its forestry and walnut investment projects in 2008/09.

"The sales have been achieved in challenging market conditions, and I believe the result reflects the strength of the Gunns investment offering," Gunns chairman John Gay said.

"The company is committed to continuing investment in the plantation estate, as well as downstream processing."

 

More to come...

 

The announcement is below:

 

 

Highlights

- TFS has received applications from MIS and non-MIS investors for 1,025 hectares of Indian Sandalwood, representing an increase of 26% on FY08

- TFS has attracted non-MIS investment for the first time with an application received for 350 hectares in the new 2010 Indian Sandalwood plantations amounting to an investment of $35m, and a further $15m into the purchase of existing Indian sandalwood plantations in the secondary market

- TFS has closed its retail MIS for FY09, having accepted applications for 675 hectares. This is a strong response from retail market given the current domestic MIS environment

- Positive retail take-up and non-MIS direct investment endorses TFS's strategy of a vertically integrated business

- TFS expects non-MIS sales to grow year on year as the Emirates Investment Group JVC gains further traction in core markets such as the Middle East

MIS Sales

Sandalwood grower and processor, TFS Corporation (ASX:TFC), today announced the company had accepted applications for 675 hectares in its 2009 Indian Sandalwood MIS Project.

Sales of the 2009 Indian Sandalwood MIS Project raised $51.1 million (GST inclusive) compared to $59.8m (GST inclusive) in FY08 (15% decline). During a period of industry uncertainty, the 2009 project is a strong endorsement of TFS's vertically integrated business model.

Institutional Sales

Following its recent joint venture agreement with Emirates Investment Group, TFS established the Beyond Carbon Trust (Beyond Carbon) to allow overseas institutional investors the opportunity to purchase Indian Sandalwood plantations managed by TFS.

TFS is pleased to advise that Beyond Carbon has received applications for 350 hectares of Indian Sandalwood plantations amounting to an investment of $35m. This is a significant development for TFS and represents the first investment by non-MIS investors into Indian Sandalwood plantations managed by TFS.

Funds for plantation hectares applied for under the Beyond Carbon structure are expected to be received by April 2010 when planting is scheduled to occur.

The terms of TFS' agreement with Beyond Carbon are such that;

- At the time of planting TFS will receive a single upfront payment of $100,000 for each hectare sold

- TFS will plant and manage the those plantations owned by Beyond Carbon for up to 14 years

- Beyond Carbon will acquire the land upon which its plantations are located at commercial rates from TFS at the time of planting

- TFS will not receive any ongoing management fees

Secondary Market for Sandalwood Growers

A part of its Beyond Carbon initiative TFS also intends to create a secondary market for existing Indian Sandalwood plantations managed by TFS.

Existing growers will have the opportunity to generate some liquidity in their investment by selling some or all of their holding to Beyond Carbon. The secondary market will be initiated by a commitment from Beyond Carbon to invest up to $15m to purchase existing Indian sandalwood plantations.

Further secondary market investment is expected as institutional investment expands.

FY09 Earnings Guidance

In recent years TFS has provided earning guidance at the time of its annual MIS sales announcement. TFS is still finalising the accounting treatment for the significant non-MIS sales included in this years announcement.

Accordingly, TFS will not be providing profit guidance at this time.

TFS intendeds to release its full year results in the week commencing 17 August 2009

Executive Chairman of TFS, Mr Frank Wilson, said: "The positive response to our project from MIS and non MIS investors is a good outcome considering the challenging industry backdrop".

"At the start of the financial year we made conscious decisions to broaden our funding base away from MIS. The offshore investment in Sandalwood Plantations managed by TFS is a result of this and is another step in the ongoing transformation of our business model.

"Our JV agreement with Emirates Investment Group has raised the profile of TFS in key European and Middle Eastern markets, and the early introduction of non-MIS sales bodes well for further progress.

"What has surprised the management team is how quickly the JVC agreement has shifted our funding model, and going forward we expect plantations to be funded by both MIS and non-MIS investment with non-MIS investment playing an increasingly important role".

"Recent presentations to growers have emphasised that TFS is a well run business, with very low debt, and has an extremely high value end product that leaves plenty to be shared by the growers, managers, and shareholders alike".

"As we head into our first sandalwood harvest in 2012 TFS is positioned to be the world's leading sandalwood producer with a vertically integrated business across growing, harvesting, processing, marketing and international sales."

 

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