Agriculture, Food & Beverages

A material shortening of the net working capital cycle in FY25, primarily driven by a reduction in DIO.

The Agriculture, Food & Beverages sector in Australia rebounded in FY25, with national summer and winter crop levels above ten-year averages and strong domestic demand offsetting the slowdown in China that has impacted exports. Inflationary pressures eased but are still evident, particularly for labour and freight. This was reflected in our sample, with 86% of operators reporting an increase in revenue but only two thirds of those companies delivering both revenue and EBITDA growth.

This sector carries the largest working capital load, however sampled companies improved average DWC by 18.3 days to 91.4 days in FY25, which was the largest improvement across all sectors covered. 43% of the sample reduced DWC by two weeks or more. The reduction in DWC was driven by lower inventory holdings, with average DIO falling by 17.1 days to 127.4 days.

After consecutive years of DIO increases, the reduction in FY25 indicates a release in the build up of inventory, albeit there remains a large spread in DIO across the sample that can be attributed to the mix of inventory types being managed, from perishables to products and ingredients with longer shelf-lives.

DSO decreased by 0.9 days to 43.9 days and DPO increased by 1.7 days to 69.8 days, with a mix of results at a company level. Notably, of the sampled companies that were able to achieve a reduction in DSO, two thirds passed on the cash flow benefit to their suppliers through faster payments.

Our Australian sample’s DWC remains higher than their international peers, driven by higher DIO when compared to the Asian, European and US markets. In Asia and Europe in particular, the prevalence of cold chain logistics, rural connectivity, and export infrastructure, enables faster movement of goods, whilst Australia’s vast geography and lower population density can slow distribution and increase inventory holding times.

Looking ahead to FY26, the evolving international uncertainty regarding tariffs and trade partners will create both opportunities and threats for the sector, with domestic consumer demand expected to remain strong.