With a herd of 541,000 head AACo is Australia’s largest cattle producer by significant margin, but sales of processed and branded beef , not cattle, now account for more than 50pc of the company’s total annual revenue.
The accelerated shift towards vertical integration prompted the company to unveil a new business structure at its annual general meeting in Brisbane yesterday.
Managing director Jason Strong explained that the previous production-style business model, which comprised a pastoral division and a branded beef division, was no longer optimal.
Instead AACo has transitioned its management and reporting structures to align with the three distinct supply chains in which it now operates: Grassfed cattle, Grainfed Cattle and Northern Beef.
The changes are designed to enable AACo to maximise margins across each entire supply chain.
Presentation slides shown to shareholders outlined the following attributes of each division:
|Capital employed||About $200m||About $100m||About $800m|
|Main Product||Differentiated, branded beef||Quality manufacturing beef||Live cattle sales|
Yesterday’s meeting heard that AACo’s sales of boxed beef for the three months to June 30, 2014, reached a quarterly record of 2.6 million kilograms of Wagyu beef and 2.9 m kg of beef from shortfed and other operations. Both categories were up by 23pc and 70pc on the same period a year earlier.
The presentation also explained that AACo is focusing on reducing ‘leakage’ from its supply chains and is focused on maximising the value-adding of its products.
It intends to increase the ratio of product sold as branded beef by AA Co and cattle sold live to third parties from 53pc-47pc to 85pc-15pc.
Mr Strong said the $91m abattoir under construction near Darwin is on track to be commissioned as scheduled in September.
Employment and training of plant workers was now ramping up in-line with the construction timeline, and advanced discussions were being held with customers for product that the abattoir will produce. Mr Strong noted that 90CL trimmng prices which will be a key off-take product continue to perform well.
To see Beef Central’s earlier article on AACo’s 2014 Full Year results reported in May click here