Investors accepted yesterday’s news of big losses from the Australian Agricultural Company (AACo) for the year to March. Thanks to drought and floods the beef and cattle group was hit by $107 million in one-off losses.
Aust Agricultural provided a trading update and disappointing guidance. However, management and the broker agree that under the company’s forced industry accounting standards, earnings become rather meaningless. They will depend entirely on the mark-to-market cattle price on Dec 31.
The broker viewed the profit result as a strong operational performance as it reflected delivery on strategic targets. With cattle prices currently strong management has indicated 2007 has begun well, though the broker has cut its profit estimate by 16.9% to $26.1m to factor in stronger herd building assumptions. Despite this, its Buy rating has been maintained.