Price-per-kilogram lift delivers positive financial result for AACo

Price-per-kilogram lift delivers positive financial result for AACo

Beef
REBUILDING: Cattle are mustered on AACo's Glentana Station, west of Springsure in Queensland.

REBUILDING: Cattle are mustered on AACo's Glentana Station, west of Springsure in Queensland.

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AACO's full-year financial results show operating profit of $24.4m, up from $15.2m

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AN increase in price-per-kilogram received has helped deliver a significant jump in operating profit despite a reduction in overall meat sold for Australia's largest beef producer, Australian Agricultural Company.

The organisation today handed down its full-year results for 2020/21, which show an operating profit of $24.4 million, compared to $15.2m for the prior corresponding period. JobKeeper subsidies to the tune of $6.7m formed part of that figure.

AACo's statutory profit after tax for the year ending March 31 is $45.5 million, up from the net profit of $31.3m for the previous period.

A $76m savings in operational expenditure also contributed strongly to the result.

AACo owns and operates properties, feedlots and farms, comprising around 6.4m hectares of land in Queensland and the Northern Territory. That makes it the owner of around 1 per cent of Australia's land mass. It manages a cattle herd of 339,000 head.

In speaking to the results, managing director and chief executive officer Hugh Killen outlined a marketing strategy that pivoted to take advantage of changing consumer habits during a global pandemic, particularly the rise of the at-home chef.

That delivered an 8pc improvement in the average meat sales price per kilogram.

"We focused on maximising returns from every cut of meat we produce, by ensuring the right cuts were available for the right market at the right time" Mr Killen said.

The amount of product that moved through AACo's Westholme and Darling Downs brands now represents 74pc of all the company's branded beef sales.

That includes 80pc of the highest-value loin cuts.

Those two brands have achieved annualised price-per-kilogram growth of 17pc since 2019.

"Getting maximum price-per-kilo has been even more important in this financial year as we've faced headwinds in overall meat volumes," Mr Killen said.

"The average F1 Wagyu life cycle is 3.5 years. This means that when flood and drought impact calving rates, it takes time to flow through to meat production volumes.

"We began to feel the effects of successive years of drought this financial year with overall sales down 19pc.

"Ensuring premium prices is so important under these circumstances."

Reduced meat sales volume is expected to continue in the next financial year.

Better with branding

In a briefing for investors and analysts this morning, Mr Killen further explored the benefits of branded beef sales.

He explained that as a general rule 15 to 20pc of meat from an animal falls into the high-quality loin and rumps category, which can be sold at a premium.

Since 2019, AACo's price-per-kilogram for loins and rumps has improved 20pc on a compounded basis.

A further 35 to 45pc of meat fits into the barbecue and secondary cuts category and 63pc of AACo's cuts in this category now sell under brands.

US loves Westholme

With the exceptions of China, Europe and the Middle East, AACo appears to have navigated COVID favourably.

Branded beef price-per-kilogram was up 14pc in North America, which Mr Killen said was driven by growth into retail channels during the pandemic and a focus on brand awareness.

The Westholme brand tripled its following on Instagram this year, with the majority of the audience in the United States, and AACo also launched its first paid digital marketing campaign this year.

ALSO SEE:AACo's branded beef best for tough times

"AACo has connected with new customers and responded to key changes," Mr Killen said.

While total meat sales fell across Asia and Australia, both achieved a 5pc improvement in price-per-kilogram.

The proportion of product sold to China fell but it was offset by growth in the rest of Asia and North America, Mr Killen said.

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