What occurred

Shares of Farmland Companions (FPI) fell 15.5% over the previous week, in response to information from S&P International Market Intelligence, after the actual property firm issued a tepid development forecast and warned that its working earnings might fall sharply within the coming yr. 

So what

Farmland Properties bought 20 properties and offered 5 in 2022. It additionally acquired land and buildings for 4 agriculture tools dealerships.

Demand for farmland stays excessive, which is enabling the corporate to efficiently lease its properties at engaging charges. Farmland Properties renewed 95% of its row crop mounted farm lease leases that expired in 2022 at a mean lease improve of roughly 16%. 

In all, whole working revenues rose by 8.9% yr over yr to $21.8 million. Its adjusted funds from operations (FFO), in flip, climbed 12.7% to $10 million.

Nevertheless, adjusted FFO per share declined by 5.3% to $0.18, as inventory gross sales elevated its share depend by a whopping 47% final yr. The corporate has used the funds raised from these share choices to amass new properties and pay down its debt. The corporate ended 2022 with $439.5 million of whole debt excellent, down from $513.4 million on the finish of 2021. But regardless of these strikes to scale back its borrowings, greater rates of interest are driving up FPI’s financing prices.

“Inflation that’s serving to to push farmer profitability and land values to document ranges can also be resulting in elevated curiosity prices for the corporate and debtors worldwide,” CEO Paul Pittman stated in a press launch. 

Now what

Steering additionally most likely upset buyers. The midpoint of the corporate’s income outlook for 2023 requires development of lower than 1% in contrast with 2022. 

Administration additionally warned that the corporate’s adjusted FFO per share might fall by roughly 30%, pushed partly by decrease crop gross sales and better curiosity expense.

“Provide chain disruptions, climate occasions, and different components have resulted in volatility in sure crop yields and crop costs,” Pittman stated. 

Nonetheless, wanting additional forward, Pittman sees encouraging tendencies that would assist gas FPI’s growth. “We stay constructive on the outlook for the farm economic system, as world meals demand continues to be very sturdy and values of premium farms in our Corn Belt, Mississippi Delta, and Southeast areas proceed to extend to their highest ranges in years,” Pittman stated.