$262m Equity Value 31.6% Gearing 1.56cpu Current Dist Quarterly Distributions $1.21 Unit Price AAM Diversified Agriculture Fund (ADAF) Assets: 12 (Sunshine, Round Cowal, Glencoe, Bergen Park, Warili, Terrick Terrick, Wooroolah, Moorlands, Thornleigh, Mount Harden, N.F. McDonnell & Sons, Permalog Timbers) Production Region: Central West NSW (Forbes NSW), Central West QLD (Blackall QLD), South Eastern SA (Mount Gambier SA), Northern Brisbane (Narangba QLD) Asset Type: Mixed livestock and broadacre cropping (dryland and irrigated), beef cattle and sheep, sawmilling facilities processing softwood timber Land Area:152,729 ha Water Assets: 14,749 ML Commodity: ~39,700 sheep, ~15,000 cattle, various grain crops, 447,000m 3 softwood timber processed per annum ADAF has a 44.1% equity stake in SCPF Asset Information: Ben Matigian - Fund Manager Following the completion of ADAF’s investment in Permalog in early March, the ADAF unit price has been revised upwards to $1.21.This business is now integrated into the Australian Softwood Company (ASC) and performing in line with expectations. The March quarter distribution for ADAF was 1.56cpu and in line with expectations. Reduced income from Sunshine Farms Aggregation (SFA) was offset by increased income from Australian Livestock Company (ALC) and Australian Softwood Company (ASC). The cash distribution of 0.48cpu from the ADAF Operating Trust is fully franked. SFA is facing some challenges due to a reduced planting area for crops and grazing area for livestock. This highlights the importance of integration with ALC and the diversification benefits of ADAF’s operations across geographies and commodity supply chains. A number of complementary assets within existing supply chains in the livestock and timber processing sectors have been identified for acquisition and are in the final stages of due diligence. At this time, we are scheduled to open the new capital raising via a rights issue for ADAF in late May (to close in June). These additional funds will allow AAM to execute more swiftly on assets and the initial expansion in Northern Australia. Prior to any capital raising a revaluation of assets will be undertaken and we expect some positive movements due to changes in market valuations of select assets in the ADAF portfolio. 1. March 2022 Quarterly Report Entity Unit Price Cash Distribution AAM Diversified Agriculture Real Asset Trust $1.07 1.08 cpu AAM Diversified Agriculture Operating Trust $0.14 (fully franked) 0.48 cpu AAM Diversified Agriculture Fund $1.21 1.56 cpu
Production Region: Central West NSW (Forbes NSW), Central West QLD (Blackall QLD), South Eastern SA (Mount Gambier SA), Northern Brisbane (Narangba QLD)
Asset Type: Mixed livestock and broadacre cropping (dryland and irrigated), beef cattle and sheep, sawmilling facilities processing softwood timber
Land Area:152,729 ha
Water Assets: 14,749 ML
Commodity: ~39,700 sheep, ~15,000 cattle, various grain crops, 447,000m3 softwood timber processed per annum
ADAF has a 44.1% equity stake in SCPF
Asset Information:
Ben Matigian - Fund Manager
Following the completion of ADAF’s investment in Permalog in early March, the ADAF unit price has been revised upwards to $1.21.This business is now integrated into the Australian Softwood Company (ASC) and performing in line with expectations.
The March quarter distribution for ADAF was 1.56cpu and in line with expectations. Reduced income from Sunshine Farms Aggregation (SFA) was offset by increased income from Australian Livestock Company (ALC) and Australian Softwood Company (ASC). The cash distribution of 0.48cpu from the ADAF Operating Trust is fully franked.
SFA is facing some challenges due to a reduced planting area for crops and grazing area for livestock. This highlights the importance of integration with ALC and the diversification benefits of ADAF’s operations across geographies and commodity supply chains.
A number of complementary assets within existing supply chains in the livestock and timber processing sectors have been identified for acquisition and are in the final stages of due diligence.
At this time, we are scheduled to open the new capital raising via a rights issue for ADAF in late May (to close in June). These additional funds will allow AAM to execute more swiftly on assets and the initial expansion in Northern Australia.
Prior to any capital raising a revaluation of assets will be undertaken and we expect some positive movements due to changes in market valuations of select assets in the ADAF portfolio.
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March 2022 Quarterly Report
Entity Unit Price Cash DistributionAAM Diversified Agriculture Real Asset Trust $1.07 1.08 cpu
AAM Diversified Agriculture Operating Trust $0.14 (fully franked) 0.48 cpu
AAM Diversified Agriculture Fund $1.21 1.56 cpu
March 2022 Quarterly Report
Australian Livestock Company (ALC)AAM Diversified Agriculture Fund
Highlights • Favourable seasonal conditions promote extensive fodder production• Ewe flock procurement grows to 30,000 head• Accelerated lamb growth leads to first certified organic lambs being contracted for sale• All replacement heifers selected by independent classer in line with strategic breeding program• Wagyu bull procurement partnership established with leading seedstock producer
Nathan Morris - Executive Director Pastoral Operations
The early onset of the wet season in October was followed by additional rainfall during the quarter, generating significant pasture and herbage growth on ALC properties. These favourable seasonal conditions, combined with upgraded fencing infrastructure to exclude pests and facilitate better internal grazing management, has positioned the assets well for a positive production year ahead.
Cattle numbers have continued to be reduced to capitalise on favorable market conditions and to make way for an expanded sheep flock. Sales of the cattle on agistment in New South Wales were completed throughout the quarter, while ~10,000 additional Dorper Ewes were purchased, to take the total flock to ~30,000, achieving the initial FY22 target.
The first round of lamb marking occurred in the newly constructed sheep yards, with lamb weights pushing above initial expectations due to favorable seasonal conditions and the overall abundance and diversity of livestock feed. This result brought forward the first sale of certified organic lamb from the aggregation, with 2,600 lambs now contracted for sale in May.
First round cattle mustering and calf marking also commenced during the quarter. The stock are in outstanding condition, and calving percentages and growth rates were above expectations.
Recently inducted replacement heifers were selected for moderate frame score, structural soundness and conformation, fertility, growth rate, genetic composition and maturity pattern. The selected heifers will be joined to high grade Wagyu bulls to further improve fertility, to promote early maturity in their female progeny and to target premium contracts for meat quality.
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March 2022 Quarterly Report
3.
1st calf heifers with F1 Wagyu calves Ultrablack heifers located at Mt Harden
An additional ~10,000 Dorper Ewes were purchased during the quarter
March 2022 Quarterly Report
Sunshine Farms Aggregation (SFA)AAM Diversified Agriculture Fund
Highlights • Flood impacts subside • Divestment of 7,000 ewes to make way for ALC integration• Harvest complete• 2022 winter crop sowing commences • Cotton crop irrigation complete with yields looking favorable for a May picking
Nathan Morris - Executive Director Pastoral Operations
The SFA properties experienced some flooding early in the March quarter, however they were not impacted by the April flood event, which affected many eastern parts of New South Wales.
The flood conditions experienced during the quarter have now eased, although the Wyangala Dam on the Lachlan River continues to remain at or close to full capacity.
Localised storms in the catchment area caused additional flows into the lake paddock on one of the properties with ~6,500 acres of grazing land on the aggregation deemed unusable due to being covered in water. This is impacting the quantity of lambs and sheep that can be traded in the short term, and will impact the profitability of SFA’s sheep enterprise for the next six to 12 months.
Divesting the Merino ewe flock has helped reduce the requirement for grazing areas. 7,000 ewes were sold through an EOI process that commenced in early March. The process was successful with all ewes achieving attractive prices. The Dorper lambs will be integrated from ALC and will occupy improved pastures and dual-purpose grazing crops outside of the lake area.
The team completed the delayed harvest during February, reaping 98% of the harvestable area. Since harvest, grain prices have improved by ~40%, largely driven by the uncertainty stemming from Russia’s invasion of Ukraine.
40% of SFA’s harvested crop remains stored and unsold, which may provide strategic opportunities to take advantage of advancing markets and to balance the negative impacts of lost/unsown areas and quality downgrades due to the prevailing weather conditions throughout the financial year.
The 500ha of planted cotton is slowly compensating for its cold wet start with expected yield levels increasing. Irrigation of this crop is now complete and operations have now turned to preparation for picking in May, with sunny dry conditions required to achieve this timing outcome.
Ground preparation for the 2022-23 cotton crop is also complete, including a neighbouring leased block which will allow an additional 113 ha of cotton to be grown. This additional land area will help maintain cotton production while further irrigation areas are being developed across the aggregation.
Planting of the 2022 winter cropping program is under way, including a total of 5,677 ha comprising of:
• Wheat: 1,439 ha (including 120 ha dual purpose grazing)• Barley: 1,080 ha • Canola: 1,564 ha (including 237 ha dual purpose grazing) • Chickpeas: 83 ha • Fava beans: 525 ha • Improved pasture: 986 ha (including permanent pasture and lucerne establishment)• Cotton (summer): 576 ha
The very wet 2021-2022 summer has resulted in a strong focus on weed control and undertaking additional ground works to regenerate areas that were damaged with wheel tracks during the wet harvest period.
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March 2022 Quarterly Report
This process also assists in incorporating heavy stands of stubble into the soil profile, with the organic matter being returned to the soil whilst reducing the use of herbicides for weed control. This is significant given an increase in herbicide prices and other production inputs, including fertiliser and diesel, of more than 100% year-on-year. It is also anticipated strong commodity prices will help to further offset these input cost rises post harvest.
Sowing of early dual-purpose canola has commenced, with crops expected to be available for grazing by mid-April.
The development works at SFA continue with field one of six now complete. Favourable weather conditions will allow this work to continue over coming months.
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Sunshine Farms irrigation development Cotton at ‘Glencoe’, February 2022
SFA staff cricket match on Australia Day at ‘Glencoe’
March 2022 Quarterly Report
First full quarter and Christmas shutdown The March quarter saw the completion of the first full quarter of operations under ADAF ownership following completion of the N.F. McDonnell and Sons acquisition in November 2021.
A focus on developing people, enhancing culture and workplace safety initiatives has been prioritised as the business seeks to maintain continuity and performance as a key measure of success while transitioning ~125 employees to new ownership.
The business undertook critical maintenance in the shutdown period over Christmas, including an upgrade to electrical and safety control systems for the log sorting line, overhaul of the main saw dust chip bin and levelling and grading of the despatch yard to allow for future works.
The business also delivered on a joint R&D project to implement a new design of chipper heads, which are a very expensive consumable part traditionally imported from Europe. This project has been very successful in reducing the number of times the chipper head needs changing, which has subsequently and meaningfully reduced operating costs in this section of the business.
TIACS launch at N.F. McDonnell & Sons In January, the mental health support program, ‘This is a Conversation Starter‘ (TIACS) was officially launched at N.F. McDonnell & Sons at a morning tea. Colourful work shirts were provided to employees and a conversation initiated on the support services available to employees through TIACS and the company’s Employee Assistance Program.
Premier’s VisitNewly elected South Australian Premier, Peter Malinauskas visited the Limestone Coast region, 72 hours after being sworn in, to meet with industry and explain his Government’s funding commitment to the manufacturing and processing sector. The N.F. McDonnell & Sons business was selected as the only timber enterprise visited by the Premier in the region. In his messaging, the Premier was clear he is committed to seeing the industry grow to generate more jobs, a positive prospect as AAM explores further opportunities to expand within the sustainable softwood supply chain.
Australian Softwood Company (ASC)AAM Diversified Agriculture Fund
Highlights • Permalog transaction completed • First full quarter and Christmas shutdown • TIACS launch at N.F. McDonnell & Sons • Premier’s visit
Ben Edser - Executive Director Poultry, Timber and Sustainability
Permalog transaction completedThe Permalog transaction was successfully completed in the first week of March. A full shut down was implemented for the first two days to allow a focus on transition and safety and to re-induct the workforce under the safety protocols of the broader AAM business.
The business has traded in the remainder of March in line with expectations.
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South Australian Premier, Peter Malinauskas during his visit to N.F. McDonnell and Sons
Any unauthorised disclosure, dissemination, distribution, copying or the taking of any action in reliance on the information herein is prohibited. AAM Investment Group Pty Ltd ABN 28 612 701 274 and its subsidiaries including AAM Licensees Pty Ltd (AAML) ABN 94 169 645 416, AFS Licence 458978, provide this information for general reference only. Any financial product advice is general advice only provided by AAML and does not take into account any individual’s objectives, circumstances or needs. Past performance is not an indication of future performance. AAML is the trustee of the Southern Cross Poultry Fund comprising of Southern Cross Poultry Investment Trust ABN 98 971 102 645 and Southern Cross Poultry Operating Trust ABN 91 348 989 830, the Pastoral Development Trust comprising of the Pastoral Development Property Trust ABN 16 472 041 766 and the Pastoral Development Cattle Trust ABN 46 156 756 734, the Sustainable Softwood Trust ABN 21 446 674 754 and the AAM Diversified Agriculture Fund comprising of AAM Diversified Agriculture Real Asset Trust ABN 66 105 484 925 and AAM Diversified Agriculture Operating Trust ABN 82 620 396 937.
