Australian Agricultural Company has reported an operating profit of $24.4 million for the first half of FY21. Managing director and CEO Hugh Killen said it was a “solid year” under the circumstances.
Snapshot
- operating profit of $24.4m ($17.7m pre-JobKeeper) compared to $15.2m previous corresponding period (pcp);
- operating cash flow of $18.4m ($11.7m pre-JobJKeeper) compared to $20.1m pcp;
- statutory EBITDA profit of $99.3m, up $19.2m on pcp;
- 8% improvement in average meat sales price per kg;
- Westholme and Darling Downs now represent 74% of branded meat sales;
- net assets more than $1bn, NTA of $1.75 vs $1.53 shows strengthening of balance sheet; and
- lower volume of meat available for sale in FY21 set to continue into FY22 due to prior years’ drought and flood.
Killen said this year would go down as one of the most challenging on record for many companies and AACo was no different.
“The fundamentals of the business remain strong, and we’ve made progress with our brands, which is encouraging considering the ongoing challenges that we will navigate over the coming few years.
“A significant reduction in expenditure, improved price per kilo and further progress in our goal of making AACo a simpler and more efficient business helped deliver this result.
“The last 12 months have been dominated by uncertainty across many industries and ongoing disruption across our key markets around the world. These risks continue, despite positive progress in virus suppression in parts of the world,” Killen said.
Other external forces were also having an impact, with herd sizes reduced due to “historic tumultuous seasonal impacts” of drought and flood.
Meat and Livestock Australia has revised down cattle slaughter forecasts to their lowest level in 36 years and a fall of 11 per cent on 2020 levels. The national cattle herd is also coming off its lowest level in 25 years, in 2020.
Killen said a number of AACo properties are seeing below average rainfall and the Gulf properties are still recovering from the flood, with limited pasture response.
Regional performance
The company recorded positive results in all regions except China and Europe/Middle East.
In the North American market branded beef price per kilo was up 14 per cent compared to FY20, driven by growth into retail channels during COVID-19 and a focus on digital and social campaigns to drive brand awareness.
The region now represents 19 per cent of total meat sales, up from 7 per cent pcp, the company said.
While total meat sales fell across Asia and Australia, both achieved a 5 per cent improvement in price per kilo compared to FY20.
AACo continued to adapt to uncertainty in the Chinese market, which has been a traditional destination for AACo’s trim product. The proportion of product sold in China decreased in FY21 – offset by growth in the rest of Asia and North America. AACo sales in Europe and the Middle East directly felt the impact of COVID-19 on food service. Atthe same time our major retail focus in FY21 has been in Asia and North America, resulting in a drop in the proportion of AACo meat sales going to Europe, AACo told the ASX.
Sustainability initiatives
AACo said it would release its second sustainability report in July. Achievements include:
- the introduction of AACo’s Beef Cattle Herd Management Carbon Project, to reduce the emissions intensity of beef cattle production;
- focus on animal health and welfare, including the establishment of the AACo Animal Health and Welfare committee;
- continued progress in the poll program; and
- more than doubling the amount of solar bores.
AACo was #38 on Food & Drink Business’ Top 100 Food & Drink Companies for 2020.
