Australia’s largest cattle company, AACo, has turned its finances around, delivering an after-tax profit of $31.3 million just a year after it announced $148.4 million in losses.
However, the size of its herd has fallen nearly 20 per cent to around 346,000 head, which is understood to be the smallest numbers AACo has controlled since joining the ASX in 2001.
- The net profit of Australia’s biggest cattle company improves nearly $180 million in the past year
- AACo’s cattle herd drops nearly 20 per cent to 346,000 head
- Its abattoir near Darwin continues to cost it millions, nearly two years since its closure
The company also flagged “uncertain times” ahead because of COVID-19 and some immediate challenges from China’s snap import ban on four Australian abattoirs.
AACo delivered a statutory EBITDA (earnings before interest, tax, depreciation and amortisation) profit of $80.1 million, a 144 per cent change from the previous year’s loss of $182.7 million.
It said the turnaround was “largely attributable to the $254.6 million swing in the value of livestock herds”, with live cattle markets recovering from sharp price declines last financial year.
“The whole company is really starting to come together well,” chief executive Hugh Killen said.
Chinese suspension of beef plants
Earlier this month, China announced import suspensions on three abattoirs in Queensland and one in New South Wales.
AACo said the Chinese market represented about 15 per cent of its total meat sales and that one of the banned abattoirs was responsible for nearly two-thirds of those sales.
Mr Killen said the company was confident it could redirect that meat into other export markets such as South Korea and the United States.
“AACo’s global footprint and customer base enables us to divert product to other markets if required,” he said.
“About half of what we put in China is trim, and the trim market in the US is very buoyant at the moment given the challenges they’re having in processing, ironically enough, so there’s opportunities to redivert to markets like that.”
AACo’s meat sales fell slightly year on year to $229.6 million.
Sending more beef into supermarkets
As hospitality venues around the world closed due to coronavirus restrictions, Mr Killen said AACo moved to increase sales to the retail sector and had been working hard to find markets for its high-end Wagyu products.
“While food service remains an important sales channel for the business, in this current environment we are increasing focus into retail sales channels while protecting the brand development made to date in the food service sector,” he said.
“Retail has always been a strong component of AACo’s channel mix, representing approximately 40 to 50 per cent of overall meat sales in 2019-20.
“We are now doing further work with our distributors and wholesalers to accelerate our supply of products into some of the world’s largest supermarkets, gourmet butchers and direct to consumers online.”
In April, AACo reduced the salaries of its managing director and chief executive by 20 per cent for three months, as well as cutting the board of directors’ fees by 20 per cent over the same period.
A number of sales and marketing staff were temporarily stood down, and corporate staff were asked to reduce their working week to four days from May 1 to July 31.
Darwin abattoir still costing millions
It has been nearly two years since AACo closed the doors of its Livingstone abattoir near Darwin, but the $100 million facility continues to cost the company.
Operating costs there were more than $5.8 million over the past 12 months, a sum Mr Killen said he was keen to see the back of.
“It’s important to note the abattoir is not mothballed, it’s just not operational,” he said.
“We’ve had people on site doing capital improvements, so we can start it up again if we need too … and there are some other costs attributed to all of our licensing.
Mr Killen said the company had been in “discussions with a number of parties” about how to get the abattoir back up and running.
“While our herd numbers will probably go up again in the next little while, AACo’s big mega numbers before my time was probably too many,” he said.
“So I think we will moderate around these numbers, but we’ll see what happens.”