Western Australia’s timber and wine industries will be among the winners from growing demand for tax-effective investment schemes. Mark Beyer reports.
The boom in managed investment schemes last financial year will result in more than $150 million being invested in agricultural enterprises in Western Australia over the coming months.
The biggest winner from the MIS boom will be the timber industry, with at least $100 million due to be spent establishing 12,000 hectares of new blue gum plantations in WA’s South West and Great Southern regions.
WA wine projects raised more than $22 million, despite the current oversupply of red wine grape varieties, while sandalwood and tropical fruit projects also attracted significant investor support.
Nationally, the total amount raised through tax effective MIS schemes jumped 75 per cent last financial year to $610 million, according to Adviser Edge Investment Research.
Perth-based Great Southern Plantations increased its dominance of the sector by raising an unexpectedly high $240 million for its blue gum and viticulture projects.
Timbercorp raised $77 million for five different projects, covering blue gums, almonds, table grapes, citrus fruit and olives.
Other groups with large capital raisings included Gunns Plantations ($45 million), Integrated Tree Cropping ($40 million), Willmott Forests ($36 million), Macquarie Bank ($31 million) and Rewards Group ($26 million).
A review by WA Business News has identified seven MIS promoters planning to invest money in WA in the coming year, with most of the money destined for blue gum plantations.
Great Southern marketing manager David Ikin said his company would be investing about one third of its capital raising in Western Australia, equating to between 6,000ha and 7,000ha of new plantations.
ITC chief executive Les Wozniczka said his group would invest about two-thirds of its blue gum capital raising in WA. Meanwhile, Timbercorp will plant about 2,000ha and WA Bluegums will also make a small contribution.
The total new plantings in WA will be more than double the new plantings last year but well below the record levels in 1999 and 2000.
The new plantings will add to WA’s existing hardwood plantation area, which amounted to 251,000ha last December, according to the Federal department of agriculture, fisheries and forestry’s national plantation inventory.
The department’s report says one of the key issues affecting industry growth is the supply of land.
“The availability of suitable land at an affordable price is reported to be affecting the rate of planting, especially in Western Australia and the green triangle region of south-west Victoria and south-east South Australia – the regions where the largest areas of new plantations were established in the past five years,” the report says.
Adviser Edge managing director Shane Kelly said land availability could affect industry growth but only over the next two to three years.
Beyond then, the large scale harvesting of existing plantations will provide a ready supply of suitable land for new plantings.
Great Southern has a full-time team working on land acquisition and already has more than two thirds of the expected land requirements for the next nine months.
It was helped by the acquisition of 55,000ha of land from Challenger Group in March.
Timbercorp managing director Robert Hance acknowledged that land availability would be a constraint on the amount of new plantations his group could establish in WA.
The second timber plantation industry attracting investor support in WA is sandalwood.
Australia’s first sandalwood exports occurred about 150 years ago and the plantation projects now being developed are eyeing the Asian export market.
Sandalwood is used in a variety of ways, including the manufacture of joss sticks, for the production of perfumes, soaps and creams, and for woodcarvings and furniture.
Rewards Group has just closed fund raising for its fourth Western Australian sandalwood project.
It raised $3.0 million and plans to establish 400ha of new plantations near Goomalling, in the Wheatbelt region.
The other players in the sector, ITC and Tropical Forestry Services, have focused on a different species, known as Indian sandalwood.
Collectively they have already established about 1,000ha of Indian sandalwood plantations in the Ord River irrigation area in the Kimberley region.
TFS raised $8.2 million last financial year and intends to plant a further 100ha over the next 12 months, while ITC raised $6 million for its sandalwood project.
Rewards Group raised money for four MIS projects last financial year.
As well as its sandalwood project it has a wine project in WA (see next article), a teak project in Queensland and a tropical fruits project in the Ord River irrigation area.
The tropical fruits project is based on the growing of mangoes and red-flesh grapefruit. Rewards intends to spend $12 million planting 195ha over the coming year.
In total, Rewards aims to have more than 550ha of tropical fruit orchards, which it believes will give it critical mass as a supplier to major supermarket chains.
MIS PROJECTS – INVESTMENTS IN WA
Blue gums
- Great Southern: $70m
- ITC: $24m
- Timbercorp: $13m
- WA Bluegums: $1m
Sandalwood
- Tropical Forestry Services: $8m
- ITC: $6m
- Rewards Group: $3m
Viticulture/wine
- Great Southern: $16m
- Watershed Premium Wines: $4m
- Rewards Group: $2m
Other
- Rewards Group tropical fruits: $12m
