ANOTHER year and another set of tough numbers for the nation’s biggest beef producer. This year Australian Agricultural Company has delivered a modest $13.6 million EBITDA (earnings before interest, tax, depreciation and amortisation), compared to $47m in 2017.
A big chunk of the difference appears to be the ‘mothballing’ of the Livingstone abattoir near Darwin. That underperforming facility delivered an operating loss of $22.4m.
Despite the underwhelming financials, it was an upbeat AA Co chairman Donald McGauchie who told shareholders at the company’s annual general meeting in Brisbane on Tuesday that a focus on the production of ‘luxury beef’ would unlock the potential of the company.
The green shoots of the company’s transformation away from being a commodity beef producer to a company that focused on branded beef products was already there to be seen, he said.
“What sets us apart is our unique ability to produce luxury branded beef at scale,” Mr McGauchie said.
“It’s the combined power of our strategic brand portfolio, integrated supply chain and production expertise that provides us with our strong global competitive advantage.
“AA Co has been building and shaping these assets for generations.
What sets us apart is our unique ability to produce luxury branded beef at scale.
- Donald McGauchie, AA Co chairman
“They can’t be replicated in the short term and are unlikely to be matched in the future. It’s this competitive advantage that we have and will continue to invest in.”
Mr McGauchie said the company would target markets where AA Co already had established relationships with its Wylarah and Westholme brands. These markets included the UK, Singapore, Taiwan and the US. China was not on the list, he said.
He said there would be a significant increase in the use of Wagyu genetics in the company’s 500,000 head composite breeding herd as a way of improving the eating quality of AA Co beef.
Interestingly, AA Co will also push to make its benchmark 1824 brand more profitable. That would include reducing the number of cattle finished for that brand by increasing the number of young cattle sold into the restocker market.
Mr McGauchie said Livingstone had proven a difficult facility to operate given it required an annual throughput of 150,000 cattle-plus a year to be profitable.
However, it had only been processed about 100,000 cattle a year due to a number of reasons. These included the changed markets dynamics for live cattle following the 2011 ban, extended drought which saw the cattle herd reduced by about four million head and a subsequent erosion of cattle numbers from the supply area, and teething problems getting the plant running efficiently.
Mr McGauchie said Livingstone was not on the market. It was being maintained in a ‘turn-key’ state if ever a decision was made to restart or sell the facility.
