AACo's Wagyu sales drive helps cut half-year loss to $14m

AACo's Wagyu sales offensive helps cut half-year loss to $14m

Beef
Australian Agricultural Company managing director, Hugh Killen.

Australian Agricultural Company managing director, Hugh Killen.

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Australian Agricultural Company has cut is net loss back by about 80pc on the same time last year

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Strong Wagyu meat sales growth has helped the big Australian Agricultural Company rein in its losses, despite a blowout in drought-related costs to $36 million.

The big beef producer and marketer has posted an underlying operating profit of $9.4m for the first six months of 2019-20, but a $14.1m statutory net loss.

The net loss was, however, about 80 per cent better than the $68.3m statutory loss posted at the same time last year.

AACo has, again, not paid a dividend and managing director, Hugh Killen, has warned despite its improving performance there is "more work to do" before shareholder dividends are likely.

The company has enjoyed its strongest half year of Wagyu meat sales figures to date, up 9.5 per cent to $102.8m, and reported a ramped up roll-out of its premium branded beef lines.

Seven up-market launches of its Westholme brand in Britain, the US, Hong Kong, Macau and the Philippines contributed to a 106pc lift in the past year's Westholme sales.

Hong Kong sales were, however, notably subdued by the past five months' anti-Beijing protest action and market disruption across the island where hotel occupancy rates have slipped below 10pc.

Our strategy as a branded food business has accelerated in the last six months, with encouraging results - Hugh Killen, Australian Agricultural Company

Overall branded Wagyu sales growth had helped drive AACo to a positive first-half operating profit of $6.3m for the six months to September 30.

However, last year's decision to close the company's Livingstone meatworks and wind down its 1824 beef brand supply chain meant operating profit and cash flow were down on the same time last year.

Destocking and culling

Mr Killen said herd numbers had also been pruned back notably because of the drought, with the company's Barkly region properties now basically destocked, and culls of underperforming cows stepped up.

The focus was now on AACo's core branded Wagyu rmarkets, particularly overseas, with Asia now representing almost 70pc of total AACo Wagyu sales - up 8pc on the same time last year.

"Our ambition is to grow our premium brands" he said.

"Our strategy as a branded food business has accelerated in the last six months, with encouraging results.

"We're seeing improvements across the business, culminating in our strongest half yearly Wagyu meat sales and strong growth across key regions."

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The improved trading results came despite the impact of much-increased drought costs.

We've just baled more than 14,000 tonnes of hay at Emerald, which may be more than we actually need - Hugh Killen

Higher production expenses, including feed and transport totalled $36m, or about $11m more than for the same period last year.

"It shows you how tough conditions are across the country," he said.

Although feed grain supplies and prices were fairly comfortably locked in, concerns about roughage and other feed ingredients such as cottonseed prompted AACo to invest in a big haymaking effort in Central Queensland over summer.

"We've just baled more than 14,000 tonnes of hay at Emerald (Goonoo Farm), which may be more than we actually need," Mr Killen said.

"It will give us an important feed resource and save us a lot of money. Hay prices have been ridiculous."

Weaning and feeding

Across the north calves had also been weaned earlier than normal at weights around 100 kilograms or less, ensuring they could be better monitored and fed strategically while giving their mothers the chance to cope better in the dry conditions.

A strategic focus on feeding cattle well to deliver the best possible meat quality and consistency to customers, and to take advantage of rising overseas protein demand in the wake of African swine fever's spread, meant AACo would continue to invest in its herds.

"AACo's ability to produce quality, without interrupting supply around the world is one of the things that sets us apart," Mr Killen said.

"Demand for Australian beef is strong, and people across the world are looking for sustainable and safe sources of protein.

"We are identifying new opportunities and have created the right foundations for ongoing growth in existing markets.

"There is still much room for progress, but the results in the last six months should give our shareholders, our community and our industry confidence that AACo's strategy is the right one and we are heading in the right direction."

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