AACO DRIVES LUXURY BEEF STRATEGY AS PROFIT DIPS

Written on the 23 November 2016

AACO DRIVES LUXURY BEEF STRATEGY AS PROFIT DIPS

AUSTRALIAN Agricultural Company (ASX:AAC) has posted a dip in half-year profits to $47.9 million, as it shifts towards the global luxury beef segment.

The result is an almost 4 per cent decline for the six months to September 30 compared to a year earlier.

The Brisbane-based business reported a 20 per cent lift in operating EBITDA of $13.9 million, driven by branded beef sales.

Net operating cash outflows of $34.5 million include a $41.5 million investment in live cattle inventory, which is expected to be monetised over the next 12 months.

AACo managing director Jason Strong (pictured) says the strategy will ensure the company maintains its title as Australia's leading beef producer.

The company launched its flagship luxury brands Westholme and Wylarah in Singapore last month, with plans to tackle other key markets in the next 18 months.

"This represents our initial drive towards changing the global luxury beef segment," Strong says.

"As our vertical integration strategy takes shape, we are fundamentally changing the way we sell and deliver our products to consumers. This strategy will lead to increased sales prices."

Production costs were reduced by 25 per cent by capitalising on strong seasonal conditions, as well as a reduction in operational costs from its decision to own cattle right through the supply chain.

Investment in technology and innovation will continue to be a key focus, with AACo co-founding Nucleus Biologics in San Diego. The biopharmaceutical supply company produces products based largely on raw material supply from AACo.

The company also formed a Scientific Advisory Board under the chairmanship of former CSIRO CEO Dr Megan Clark to review technological advancements.

"We are pleased with our progress but we are far from finished," Strong says.

 


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