THE Australian Agricultural Co this morning announced a $19 million increase in pre-tax operating earnings to $11 million for the six months of operations to September 30.
Delivering its half-year financials, the company also reported a $97 million increase in statutory earnings to $92m and a statutory net profit of $50m for the six months, a $64m improvement on the previous corresponding period last year.
AA Co managing director Jason Strong said the result confirmed the company’s development strategy.
“Our traditional pastoral business has performed as you would expect in a rising cattle market but I’m really pleased with the performance of the group as a whole,” he said in a statement.
“This really re-enforces our commitment to the alignment we have achieved in our supply chains.
“We have a lot more to do, plenty of challenges to meet in the second half and we are now firmly focused on delivering our branding and innovation programs as we move to the next stage of the transformation phase.”
Net operating cash flow was up $52m due to the increase in operating EBITDA and a $28 million reduction in working capital as the company increased the internal supply of cattle.
The operating result was also driven by an 89pc increase in beef sales for the half to $218m due to increased prices and the ongoing shift in volume from live cattle to boxed beef. Total meat sales volumes were up 90pc on the previous corresponding period. Higher live cattle prices also drove a 28pc increase in live cattle sales to $36 million.
Mr Strong said the increase in Operating EBITDA was directly attributable to the focus on selling the highest quality beef in each of the supply chains in which the company operates.
“We are selling more kilograms, off the same herd base, for more money,” he told analysts.
“While we continue to build our branded beef business we are also continuing to invest in the fundamentals that are so important to a robust supply chain.”
Sales of boxed beef increased by $103m, half-on-half, now accounting for almost 85pc of total revenue.
“These sales are predominantly to the same customers, who are buying more beef,” Mr Strong said.
“Our Wagyu brands have won numerous national and international awards in the past six months and there is growing demand for the quality beef we produce.”
Statutory EBITDA was $92m ($5m loss in H1 FY15), while Operating EBITDA increased $19m to $11m ($8m loss in H1 FY15). Operating EBITDA is a key indicator used to monitor and manage the company. It eliminates the effect of unrealised cattle valuations and AA Co considers it a better reflection of actual financial performance under the control of management.
The company also reported increased throughput at the Livingstone Beef facility near Darwin, with Northern Beef comprising 16pc of group meat sales revenue for H1 FY16.
The AA Co board has not declared a dividend. The company said it was committed to the reinstatement of dividends and has previously indicated that on a return to sustainable and significant positive operational cash flows, directors will review dividend policy and payments.
Click here to access AA Co’s full 1H financial results posted this morning.
More details from this morning’s briefing in a following story.
Source: AA Co