THE Australian Agricultural Co has registered another big loss for its half-year ended September 30, after a decline in the value of its cattle herd and increased operating costs linked to drought in parts of its northern property network.
Australia’s largest beef producer this morning announced a net loss after tax of $68.4 million for its half-year, compared to a loss of $37.7 million over the same period last year.
Meat sales declined for the six months, but a boost in cattle sales saw first-half livestock revenue rise to $219.2m from $197.2m in the corresponding period in 2017.
AA Co also booked a first-half operating profit boost from $6.8m to $24.8m, saying this financial metric “eliminated distractions caused by unrealised livestock and inventory valuation adjustments.”
The company’s statutory earnings (before interest, tax, depreciation and amortisation) loss increased from $36.5m to $82.9m over the same period, blamed on an overall decline in market value of livestock, including a decline in the lower value composite cattle numbers.
AA Co managing director Hugh Killen said the positive underlying result, despite the current seasonal and market headwinds, validated the company’s strategy and highlighted the benefits of initiatives that had been implemented during the period.
“Our financial performance over the past six months has been impacted by a range of factors including weather and macro trends, yet we continue to deliver against our strategy,” Mr Killen said.
The increase in global beef supply, which was likely to extend into 2019, had led to competitive pressure on pricing, however AA Co’s Wagyu revenue for the half was up, driven by increased sales volumes, he said.
The statutory EBITDA loss was a result of an overall decline in market value of livestock, including a decline in the lower value composite cattle numbers, however the company had seen a 16pc increase in its highest value Wagyu herd numbers.
The Westholme and Wylarah Wagyu brands had maintained their pricing on the prior corresponding period, despite macro headwinds, the company said.
“We are transforming AA Co into a simpler, more efficient and sustainable organisation, and, in the process, are establishing ourselves as one of the world’s leading producers of premium branded beef,” Mr Killen said.
“During the half, we continued to invest in our core assets: our land, our herd, and our people. We continued to refine our supply chain and pursue greater operational efficiencies in order to optimise our production base.
“We have also invested in marketing our brands and developing our distribution network. This has enabled us to continue successfully executing on our strategy to supply the growing demands of high-end markets, both overseas and in Australia, by producing highest premium branded beef at scale,” Mr Killen said.
The ‘decisive actions’ taken earlier in the year by the board and management (closure of the Livingstone Beef plant near Darwin and discontinuation of the 1824 grainfed beef program) had supported a stronger business, he said.
As forecast in this article yesterday, the decision to suspend operations at Livingstone and suspend the 1824 brand resulted in an increase in operating profits for the period, as sales of non-Wagyu cattle were brought forward and external purchases of cattle for processing were wound-back.
However, this was offset by higher station operating expenses due to deteriorating seasonal conditions during the period, resulting in increased feed, supplement and freight costs.
The challenging conditions that had impacted operating costs during the period looked set to continue into the near term, Mr Killen said.
During the half-year, AA Co had continued to implement a range of strategic initiatives as outlined at the company’s full year result in May 2018, including launching the Westholme Wagyu brand in Dubai, opening new opportunities to supply the region’s high-end markets.
“Following our successful launch in Dubai in October, we will continue our expansion into new and larger markets, and I look forward to updating the market on our progress in due course,” Mr Killen said.
Mr Killen said his management team was focused on implementing a range of initiatives that supported four key strategic pillars: Branding and Marketing, Integrated Supply Chain, Innovation and Technology and Performance Culture.
“We’re committed to building value for our shareholders by refining our sales and marketing approach, integrating our supply chain, investing in innovation and fostering a high-performance culture,” he said.
In its last full year ended March 31, AA Co posted a loss of $102.6 million.
- Early this afternoon, AA Co’s shares were trading at $123.5c, down from a 12-month high of $1.44 in July.
AACO’s Producer to Processor strategy was doomed before it started. It takes a quantum leap to be a success in processing and the skill set,experience and one’s own capital was not there at the star nor there now. A very expensive shed left in the middle of a paddock.