Cobram Estate Olives to raise $51m for US expansion, Australian mill upgrade

Cobram Estate Olives to raise $51m for US expansion, Australian mill upgrade

Cobram Estate Olives (ASX: CBO) plans to ramp up local olive oil processing capacity and US production with the announcement of a $51 million capital raise today, offering new shares at a marginal discount to their last trading price but at a 7 per cent premium to their August ASX opening.

The company plans to spend $15 million upgrading its Boort olive mill in Victoria, where the adjoining grove size is set to grow by 253 per cent over the next nine years to 3,841 hectares, although the processing facility is operating at close to its full capacity of five million litres per annum.

This grove alone represents around a fifth of Cobram's freehold land in Australia, implying fruit harvests far above current capacity in the coming years. The funds raised will increase olive milling capacity at Boort from 30 tonnes of fruit per hour to 80 tonnes per hour, allowing for higher volumes olive oil for branded sales locally and in key export markets over time.

The largest part of the proceeds will go towards acquiring 177 hectares of freehold land in California and the development of groves there, alongside near-term acquisition opportunities. This would add to an existing 300 hectares of land in the US state, according to Cobram's prospectus, as well as a processing plant, storage facility, bottling line, laboratory and administration.

Cobram Estate plans to replicate its successful Australian strategy in the US, and is ready to deploy around $9.4 million on two two freehold properties suitable for olive groves now that due diligence is completed.

The capital raise will comprise a fully underwritten institutional placement to raise $50 million at $2 per share, as well as a $1 million share purchase plan (SPP).

"These funds will allow us to accelerate the execution of our core growth strategies in the USA and Australia," says CBO chair and co-founder, Rob McGavin.

"Over time, the USA offers tremendous opportunities for us to replicate the success of our Australian business, with further development of our grove acreage in California needed to support the strong growth of our USA packaged good sales, in particular through our Cobram Estate California range.

"Additionally, the expansion of the Boort olive mill in Australia will almost triple our olive processing capacity at that site, allowing us to match the forecast medium term fruit supply growth at that site."

The group reports a strong start to FY22, particularly in Australia. Oil supply has been extremely constrained in the USA, but the situation is expected to be reversed now that 2021 season olive oils are available.

In a Zoom call ahead of the company's launch on the ASX, joint CEO Leandro Ravetti noted parallels between the Californian olive oil market and Australia's two decades ago when consumption was just a drop above one litre per capita annually. Now Australians consume more than two litres per capita each year.

"In fact, the consumption of olive oil in the USA right at the moment is very much that of Australia 20 years ago, so it’s just a tick over one litre per capita with a very, very small percentage – less than 5 per cent of the total consumption - in the USA actually coming from American oil," Ravetti said at the time.

"That’s why it is such a great opportunity to try to replicate what happened in Australia, but in a market that is seven to eight times larger than that of Australia."

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