12 months ago AACo needed JobKeeper — now it’s posted a profit

Australia’s biggest beef producer has posted an operating profit of $24.4 million – or $17.7m, excluding JobKeeper – for the 2020/2021 financial year.

The ASX-listed Australian Agricultural Company (AACo) is crediting record-high cattle prices and an improvement in the value of the branded beef sold for the result, which also pushed the value of its cattle herd to more than $500m.

During the release of its full year results neither chief executive and managing director Hugh Killen or chief financial officer Nigel Simonsz commented on the company’s receipt of the federal government’s JobKeeper payment, except to acknowledge it accounted for $6.7m of the operating profit, which was up $9.2m on the preceeding year.

Despite the result shareholders, will not see a dividend and Mr Killen said operating through the uncertainty of the last financial year was challenging.

“Food services face ongoing disruption across our key markets across the world,” he said.

Mr Killen said the company also delivered a positive operating cash flow of $18.4m and a statutory earnings before interest, taxes, depreciation, and amortization profit of $99.3 million, an increase of $19.2m on the previous corresponding period.

Record prices bolster bottom line

AACo reported an eight per cent improvement in the value of its average meat price per kilogram and added that its Westholme and Darling Downs brands now made up for 74 per cent of its branded meat sales.

“Our strong brand portfolio and distribution partnerships have also helped us connect with new partners and respond to changes in our markets,” Mr Killen said.

The value of beef per kilogram was the big win, translating to about $1,581 per beast for its total herd of almost 340,000 head.

Mr Killen said gains, especially in North America, had meant a rise of 14 per cent per kilogram in price and an increase in sales volume of 19 per cent over the same time.

“The US has been a major focus for digital and social campaigns to drive brand awareness around Westholme,” he said.

“We’ve continued to focus on at-home chefs through meal kit product innovations and online marketplace partnerships, including with high profile chefs.”

He said the company had also seen a five per cent improvement in the value of its Darling Downs brand in South Korea over the reporting period.

Mr Killen said AACo was monitoring the Chinese market, formerly a destination for its trim product, and said alternative markets for that meat would continue to be explored.

Drought hampers rebuild

AACo’s total herd number was down 1.8 per cent on the year before, with the report pointing to losses in the 2019 floods on its Queensland gulf country properties and destocking during drought on other stations.

“One of the consequences of these seasonal impacts is lower calving rates,” Mr Killen said.

Revenue is down $40m year-on-year because AACo is holding animals as part of herd rebuild.

But Mr Killen said there had been a 47 per cent increase in calving for this financial year.

He said three years ago the company had a herd of 400,000 head and that the aim was to return to a similar number.

“A number with a four in front of us will give us more flexibility than where we are now,” he said.

“For us it’s not the total numbers — it’s also the number of cattle that are on feed, because we have a three-and-a-half year cycle in terms of our F1 program.

Net assets top $1b

AACo estimated it had more than $1 billion in net assets in 2020/2021, with growth especially in land values.

Its property portfolio alone increased to $915m, up from $810m a year ago.

While it was not mentioned in the results, Mr Killen said AACo’s mothballed Livingstone meat processing facility in the Northern Territory was costing the company about $1m a year to maintain.

“It’s absolutely a gateway asset and my view has always been that I want to operate it again and clearly where we are in the cycle right now it’s not the right time to be opening it,” he said.

“We are putting plans in place and we’re doing some work over there and just making sure that when that tide turns that we’re in a good position to open it when the conditions are right for that.”

Mr Killen said AACo remained focussed on sustainability and pointed to its second sustainability benchmarking report due to be released later this year.