FarmWorks Public Equity Sought
22 May 2008
FarmWeekly
An improved investor outlook for agricultural stocks due to dwindling world food supplies has prompted WA agribusiness company FarmWorks to prepare itself for growth through a public float or private equity offer.
FarmWorks managing director Kevin Gammage said the company had been growing from retained earnings since its inception in 2001 and while a public float was not necessarily what the company needed to do, it had to be ready for any opportunities an initial public offering could provide.
"We are not interested in a float that much but we are talking to people about listing and private equity, and we started that process some time ago", he said.
"We are at a size where we can stay doing what we do but if the supply of money is out there then you have to bring the plan out," Mr Gammage said.
"If the (market) sentiment is there and the depth is right we would be remiss if we did not test the waters."
Mr Gammage said FarmWorks was the only WA-based provider of agri-services and it was fitting the largest wheat growing state should be serviced by a WA company.
The Osborne Park-based company provides services in livestock, property, rural merchandise, agronomy and finance to more than 5500 WA growers through eight branches and 12 agencies. It also has offices in Brisbane and Adelaide.
FarmWorks - acting as an agent for BankWest - has $85 million on loan to farmers.
Mr Gammage said a successful float would allow the company to provide a wider range of services.
"It would allow us to move into the insurance area and a WA company would have a better capital base that could provide a better service."
Mr Gammage said private equity funds were focusing on selected companies with high growth prospects and agriculture was particularly attractive because of low global food stocks and an increased demand for food. "The share market is coming back again and agriculture is the flavour of the month," he said.
Eureka Report market analyst Charlie Aitken said the soft commodity bull market had the potential to be a much larger event than the base metal cycle.
He said China's growing beef consumption was expected to equal Australia's entire domestic production by 2010.
"It is entirely possible that the world will run out of food before it runs out of oil," he said.