Planfarm has wrapped up the Building Horticulture Business Capacity (BHBC) Project, after four years of working with the Western Australian horticulture industry. This project leveraged our expertise to support horticultural businesses to better understand the key drivers of success within their business, with the view to improving financial performance.

Western Australia’s horticulture industry has faced significant challenges during the past four years, which were marked by inflationary pressures, labour shortages, and margin squeezes. However, initiatives like the BHBC Project have been instrumental in supporting horticultural businesses through these turbulent times. This article explores the key aspects of the BHBC Project and its impact on the Western Australian horticulture sector, drawing insights from the 2022-23 Industry Benchmarking Report.

Overview of the Building Horticulture Business Capacity Project
The BHBC Project was a collaborative effort funded through the Hort Innovation Hort Frontiers strategic partnership initiative, with contributions from vegetablesWA, Pomewest, the Department of Primary Industries and Regional Development, and the Agricultural Produce Commission Vegetables Producers Committee. The project built on previous initiatives by Planfarm and vegetablesWA, focusing on financial and productivity business analysis to bridge gaps in business management performance. A key feature of the BHBC Project was the provision of one-on-one support from Planfarm business consultants, which enabled growers to critically analyse and improve various areas of their business.

Challenges
The Western Australian horticulture industry was significantly impacted by the COVID-19 pandemic and its aftermath. Initially, growers faced difficulties in accessing labour and markets, followed by increased input costs for fertiliser, chemical, fuel, freight, and labour. Post-COVID, inflation has further driven up business costs across the board. Despite these challenges, the BHBC Project provided valuable support, helping growers navigate these issues with expert guidance and benchmark data.

Key Insights from 2022-23 Benchmarks
The 2022-23 financial and productivity analysis, part of the BHBC Project, offers comprehensive insights into the performance of horticultural businesses in Western Australia. The report is structured into three main components: horticulture, vegetables, and pome fruits, each providing a detailed overview of industry performance.

Horticulture
The horticulture component includes all growers participating in the BHBC Project, encompassing a diverse range of crops such as vegetables, pome fruits, stone fruits, avocados, bananas, potatoes, and strawberries. Key findings indicated that, despite rising input costs, horticultural businesses have seen a positive increase in equity, primarily driven by increased land asset values rather than profit margins. Operating expenses were found to be comparable across producers, with the most profitable businesses generating significantly higher volumes of saleable production per hectare.

Vegetables
The vegetable industry analysis focuses on financial and productivity metrics over a six-year period. The report highlights that scale, crop type, or region does not significantly influence profitability. Instead, businesses with limited crop types that focus on crops suited to their growing region, market access, and produce quality tend to be more profitable. Regular monitoring of financial and production results is a common attribute of better performing businesses.

Pome Fruits
The pome industry analysis provided insights into the performance of pome growing businesses over the past four years. Like the vegetable sector, profitability was driven by factors such as efficient production systems and market access. The report noted that the average return on capital for pome growers was 3%, comparable to other investment opportunities, with better performing businesses achieving returns of up to 9%.

Performance Indicators and Longitudinal Trends
The report identified several key performance indicators crucial for assessing the financial health of horticultural businesses:

• Operating Profit per Hectare: This metric indicates the net income derived from each hectare of land. The report showed a declining trend in operating profit per hectare, reflecting the pressure from rising costs.
• Operating Efficiency: This measure provides insight into the cost required to generate $1 of income. The data suggested that costs relative to income were increasing over time.
• Return on Capital: This indicator reflects the ability to generate cash returns from a business, excluding capital gains on land assets. The report showed a decline in returns during the project period.
• Equity: Equity represents the net difference between assets and liabilities. Despite challenges, equity positions remained strong, primarily due to rising land values.

Success Stories and Future Outlook
The BHBC Project facilitated several success stories, showcasing the resilience and adaptability of Western Australian horticultural businesses during 2021-2024. By providing benchmark data and personalised consulting support, the project helped growers make informed decisions, improve their financial management, and achieve sustainable growth.

Looking ahead, the legacy of the BHBC Project will continue to support horticultural businesses in Western Australia, helping them to build capacity and navigate future challenges. The project’s comprehensive approach, combining financial analysis with expert consulting, offered a robust framework for enhancing business performance and ensuring long-term viability in the horticulture sector.

Conclusion
The Building Horticulture Business Capacity Project has proven to be a valuable resource for Western Australian horticultural businesses, offering critical support in a challenging economic environment. Through strategic partnerships, comprehensive analysis, and personalized consulting, the BHBC Project assisted growers to improve their business management practices, increase profitability, and build a sustainable future for the horticulture industry in Western Australia.

Please contact Sophie Alexander on 0407 933 511 for a copy of the industry benchmark report.