NZ Rural Land re-starts dividends after $12.4m first half profit

NZ Rural Land boosted its profit in the first half.

New Zealand Rural Land (NZL) has resumed paying dividends after reporting a $12.4 million net profit for the first half to June, up from $2.5m a year earlier.

The result was boosted by a change in the fair value of its properties.

Early this year, the company sold 25% of its land equity to an Australian investment fund managed by private investor, Roc Partners, for $44.2m.

NZL used the proceeds to repay the $11.8m owing on a convertible note it drew down in April 2023 to partially fund a forestry acquisition.

Further proceeds were used to fund orchard and forestry land acquisitions with the balance retained as working capital while other opportunities were investigated.

NZL has continued to diversify its rural property portfolio with recent forestry and orchard acquisitions.

The company suspended dividends last year when its share price got too low, opting instead to buy back shares.

It has since reinstated dividend payments and will now pay an interim dividend of 1.46 cps.

The company listed on the NZX in December 2020 at $1.31, a 4.8% premium to their $1.25 issue price.

The stock last traded at 92c.

At the start, the portfolio was made up of dairy properties but the company has since diversified into forestry and horticulture, with dairy making up 50%.

“What we have seen across the portfolio is an increase in yield and an increase in lease tenure, so we are well over 12 years in term of a weighted average lease term,” managing director of NZL Management, Richard Milsom, told the Herald.

“The portfolio has diversified both by tenant, by asset and by geography,” he said.

The rural landlord currently owns 17,457 hectares of high-quality productive rural land in New Zealand which is fully tenanted on long-term leases with regular CPI adjustment provisions.

NZL’s forestry and horticulture properties now represent 33% and 6%, respectively, of the company’s annual lease income.”

In February, NZL announced its intention to acquire a 97 hectare horticultural property in Hawke’s Bay and a 1,105 hectare forestry estate in Manawatu-Whanganui. NZL has since settled both transactions and supplemented the purchases with an additional 1,501ha forestry estate in the same region.

These properties were collectively purchased for $34.9m and were leased to Kiwi Crunch, New Zealand Forest Leasing and MM forests, for an average weighted lease term and yield of 24.5 years and 7.9%, respectively (by lease value).

Milsom said its recent forestry transactions reaffirmed NZL’s partnership with New Zealand Carbon Farming (NZCF).

Post-balance date, NZL has entered into an unconditional agreement to purchase 126ha of high-quality horticultural land in one of Central Otago’s prime growing districts, for $13.3m.

Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.