THE big surge in trading conditions over the past year has contributed to a strong 72 percent increase in pre-tax profit for Consolidated Pastoral Company, the nation’s second largest beef producer and largest privately owned entity.
CPC will this morning report earnings before interest, tax, depreciation, amortisation and property revaluations of $37.8 million for its year ended March 31, up from $22 million the previous year.
The company said the EBITDA result reflected increased pricing and strong execution of productivity and operational efficiency initiatives.
Revenue was up 86pc to $164.8m, from $88.5m the previous year, reflecting additional volumes and improved market pricing for beef and cattle.
The after-tax profit rose to $20.3m, up from just $100,000 a year earlier, and a $26 million loss the year before that. Total assets at year’s-end rose to $785.9m ($734.7m in 2015), while cash generation last year was $21.1m compared to $2.2m a year earlier.
As Beef Central’s home page live export graph illustrates, prices for Indonesian weight live export steers at the end of March closure averaged 365c/kg liveweight, compared with 275c/kg a year earlier.
Operational highlights during the year listed by CPC included:
- Further investment in its Indonesian lotfeeding joint venture, taking ownership from 50pc to 80pc and moving the company closer to its end-customers
- The sale of Humbert River Station completed in April, with proceeds to be reinvested in a range of growth initiatives across the business
- Significant improvements in company productivity, reflecting investments in station assets including water and fencing infrastructure
- Expanded world class genetics program, with a strong focus on increasing profitability through the value chain
CPC chief executive Troy Setter said the strong FY16 financial performance reflected the continued successful delivery of CPC’s strategy to move closer to its customers and add move value to our cattle while executing a range of productivity improvements across the business.
The significant improvement in cash generation reflected the management team’s focus on cash returns and the rising prices for Australian cattle and beef and the continuing increase in demand for premium cattle and beef in Asian markets, he said.
“We have a conservative approach to property and livestock valuations. We want to drive the business on cash generation rather than simply on the basis of asset revaluations. Increased cattle weights, higher pricing and good cost control have contributed to improvements in cash generation over the past year,” Mr Setter said.
“In recent years we’ve made progress in further repositioning the business from being a cattle producer to an integrated global beef and cattle supplier and marketer to international markets. This transition continues to bring us closer to our customers and improves productivity and profitability through the value chain.
A number of new appointments have been made to the CPC board during the past year bringing added diversity to the skill-set amongst the company’s directors which was creating tangible benefits for the business, Mr Setter said. Mike Kinski, who spent 15 years as Terra Firma’s operational director, is now a CPC director as is the London-based Terra Firma executive Ruhul Amin. CPC has also recruited Margaux Beauchamp, executive director, corporate finance at BDO in Australia, as a new director.
“We continue to invest in CPC’s operations for future growth,” Mr Setter said. CPC’s focus on operational excellence and productivity, including a continued focus on nutrition and genetics, ensures it is well placed to benefit from rising demand for Australian beef, especially in Indonesia where on-the-ground presence and strong alignment with customers is driving outstanding opportunities for further growth.”
Parent company Terra Firma is still looking for a partner to inject hundreds of millions of dollars into CPC to fund growth, the Australian reported.
CPC has been in talks over the past 18 months to issue new shares to a strategic investor that will account for up to 40pc of its expanded capital.