Aust Ag Profit Slips

Beef producer the Australian Agricultural Company’s (AAC) half year profit fell 4% to $47.9 million.

Sales revenue for the six months to September 30 fell 18% to $214 million, from $260.7 million in the same period of 2015-16.

The company said the fall reflects its shift away from the live cattle trade and towards premium branded beef. Despite that drop, the company said underlying earnings improved by $2.4 million in the six months as it cut costs by 25% to improve margins.

CEO Jason Strong said the fall in sales reflected the company’s move towards processing and marketing premium branded beef instead of live beasts.

"It’s back against the first half of last year where we had a significant growth in our revenue as we converted from being a live cattle seller to producing and selling more meat," he said.

"Our focus has actually been on managing cost and managing our revenue and particularly our sell price.

"So what we’ve been able to demonstrate is that off a lower revenue base – which is still our second highest revenue number for a first half – but off a lower revenue base being able to produce more earnings."

Mr Strong said the group launched its flagship luxury Westholme and Wylarah brands in Singapore in October and will introduce the brands to other markets during the next 18 months.”This represents our initial drive towards changing the global luxury beef segment," Mr Strong said.

“As our vertical integration strategy takes shape, we are fundamentally changing the way we sell and deliver our products to consumers."

He said the strategy would lead to increased profitability.

The company said it cut its production costs by 25% by taking advantage of strong seasonal conditions and reducing operational costs.

It also co-founded and invested in a San Diego based biopharmaceutical company, Nucleus Biologics, which supplies pharmaceutical companies with products from its Livingstone Beef processing plant, south of Darwin.

Despite that improvement there was no dividend was declared for half year.

The shares fell 2.5% to $41.70.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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