Refocussed and Revitalised:

Australia’s Largest Onion and Walnut Producer is Poised for Growth

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-By Aleisha Parr

Twelve months ago, Webster Limited conducted a strategic review of its whole business and then set about implementing the results of the review. The outcome is a transformed company that has:

  • exited its previously underperforming carrot operation
  • divested its shares in salmon producer Tassal Group Limited
  • expanded its walnut operation with the acquisition of Gunns walnut assets in the Riverina, NSW
  • raised $10.5M in capital via a rights issue
  • reduced bank debt to a lease and seasonal finance requirement only
  • greatly strengthened its balance sheet
  • committed to capex in both its operating divisions
  • achieved sizable forward contracts prior to sowing the onion crop
  • returned to paying dividends to shareholders , and
  • positioned the company for future growth

“Our Tassal shares were our major asset,” explains Leigh Titmus, Managing Director of Webster Limited, “but we weren’t in control of that asset because we held only a twenty per cent shareholding. Any time the Tassal shares would move in either direction, Webster’s price would move accordingly, so we weren’t really in control of our own destiny and we wanted to fix that. Fortuitously, when we sold the Tassal shares, the walnut assets that we’d developed under contract for Gunns Limited in the Riverina came on the market.”

Securing these new assets (1,365 ha of orchard including land, irrigation infrastructure, and water) under the Walnuts Australia operating division has made Webster Limited the southern hemisphere’s largest walnut orchard manager and producer of walnuts with over 2,200 ha of walnuts in total under ownership and/or management. It is the culmination of just over 20 years of development and investment by Webster Limited in the walnut industry.

Leigh Titmus explains, “Gunns had chosen to get back to their core business and dispose of any non-core assets. We were well positioned to take on their walnut assets as we had developed and managed them since 2006, hence we knew the assets very well – so it was a perfect match for us.”

Originally established in 1831, Webster Limited is the fourth oldest company operating in Australia. As such, it has seen its share of ups and downs, and has evolved over the years from its original purpose as a traditional pastoral house to a now entirely land-focussed food producer. Webster Limited is Australia’s largest onion grower and exporter, and is now gaining both local and international recognition for its high quality production of fresh food products.

The company has significantly reduced its bank debt in the last 12 months, partly as a result of the Tassal share sale and partly due to a 4 for 9 renounceable rights issue, and now operates with a strong balance sheet, allowing it to invest in both of its operating divisions. At the end of this transformative year, Webster Limited is not only a refocussed, but a revitalised company.

Says Mr Titmus, “We have achieved forward contracts both for price and volume, ahead of sowing the onion crop, which is significant with respect to risk reduction. We are positioned for growth through the continued increase in walnut production over the next 4 to 5 years from existing orchards, and we have produced a pre-tax profit of $1.85M (up by $1.33M on the prior year) and returned to paying dividends to our shareholders. Considering what we have achieved, the past twelve months have been quite successful and one which the shareholders should be pleased with.”

Despite this positive position, there are challenges yet ahead for Webster Limited. With the focus on these two principally exported agricultural products – one a dietary staple and the other more of a luxury food item – the company is vulnerable to fluctuations in the growing environment as well as foreign currency. Fortunately, Webster Limited’s operations are based in fairly reliable climatic zones, and while yields do fluctuate slightly now and again, for the most part operations have been rather stable over the years.

Changes in the AUD however, are more challenging for the company. John Hosken, Sales and Marketing General Manager, explains: “We’re an export business, which is unique. If you look at other businesses across Australia they generally build their key industry in domestic business and focus on exports in a secondary manner. We are focussed primarily in exports so when the dollar strengthens, it puts significant pressure on our ability to compete, especially with onions, where we compete with other countries.”

What enables Webster Limited to continue to succeed despite this is the fact that its operations are run counter-seasonal to the northern hemisphere growing market. This means that Webster Limited is able to offer fresh walnuts and onions to its markets in the opposite six months to the northern hemisphere crops. As such, Webster Limited has secured a reputation as a high quality and reliable counter-seasonal supplier. At present, Webster Limited exports its onions to sixteen countries worldwide, and its walnuts to eight countries.

“There are other onion producing areas around Australia. They follow the seasons down from QLD through NSW into VIC and SA, and we’re probably the last in that seasonal chain, but the other areas of Australia can supply markets in the other times of the year. So exports are our game because we can produce an onion here in Tasmania which can sustain the rigours of shipping halfway around the world.”

Webster Limited’s only major southern hemisphere walnut competitor is Chile, which produces about thirty thousand tonnes annually. “That’s a lot more than us,” explains Mr Hosken, “but looking at world production, about one million tonnes are traded globally and only 3 per cent of this is produced in the southern hemisphere, so our two thousand tonnes is just a pimple. This means that we have a lot of room to move with that volume. Going forward we’ve got a lot of opportunities.”

“The big advantage we have with walnuts in Australia,” says Mr Titmus, “is that there is a very high barrier to entry.” Webster Limited is vertically integrated, with its own nursery operation as well as orchards, harvesting, processing and grading infrastructure. “It takes time and capital to get to where Webster is positioned, so we are well ahead of any other potential walnut producer in Australia. Also, we are well placed in that we have a number of revenue streams within the Walnuts Australia division from owning orchards outright and therefore owning the annual crop, to management fee income from investor growers and also fees from a cost plus margin orchard owned by a private company.”

“We’ve proven that we’re a survivor. We’re not a big company though, and we haven’t grown. Over the life of the company we certainly have evolved, and at the moment, our focus is on food. I think that’s a major factor [to our success] because commodities come and go but we’ll always need food. We’ve got an increasing population throughout the world, and food security, food supply, and food safety are foremost in everyone’s mind as we go forward.”

Webster Limited will use the coming year as a period of consolidation. However, the company will continue to seek new opportunities for sensible and compatible structured growth. With its strong balance sheet and strengthened focus, Webster Limited is poised to take full advantage of such opportunities.

Making Sense of Management

Management is the art, or science, of getting things done through people. Sounds fairly straightforward – except for the fact that people are not robots waiting to do our bidding. People have their own minds, motivations, and goals. So how do managers keep operations – and the people behind them – running as planned?

November 21, 2018, 3:47 AM AEDT