FRESH STRATEGY BEEFS UP AACO'S FORTUNES

Written on the 25 November 2015

FRESH STRATEGY BEEFS UP AACO'S FORTUNES

AUSTRALIAN Agricultural Company (ASX:AAC) has charged back in the black, with the company's ongoing shift from live cattle to boxed beef bolstering its half-year results.

The renewed focus on its supply chain has seen AACo record a net profit after tax of $50 million, compared to a loss of $14 million in the previous half-year.

Revenue from meat, cattle and crop sales totalled $258 million during the six months to 30 September 2015, up 71 per cent.

Operating EBITDA also bounced back to $11 million, in comparison to a loss of $8 million in HY14.

AACo managing director Jason Strong says the solid results confirmed the company's strategic alignment of its supply chains.

"Our traditional pastoral business has performed as you would expect in a rising cattle market but I'm really pleased with the performance of the group as a whole," Strong says.

"We have a lot more to do, plenty of challenges to meet in the second half and we are now firmly focused on delivering our branding and innovation programs as we move to the next stage of the transformation phase."

The operating result was driven by a combination of higher prices, the company increasing its internal supply of cattle and a shift in volume from live cattle to boxed beef.

Beef sales increased 89.5 per cent to $218 million in the first half, while live cattle sales experienced a 28 per cent lift to $36 million.

Strong says AACo is selling more kilograms off the same herd base for more money, positively contributing to the company's earnings.

"While we continue to build our branded beef business we are also continuing to invest in the fundamentals that are so important to a robust supply chain," he says.

"Sales of boxed beef increased by $103 million half-on-half and now account for almost 85 per cent of total revenue. These sales are predominantly to the same customers, who are buying more beef.

"Our Wagyu brands have won numerous national and international awards in the past six months and there is growing demand for the quality beef we produce."

The company is not paying an interim dividend.


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