Australian Agricultural Company suffers $100m hit

By Aidan Fortune contact

- Last updated on GMT

Australian Agricultural Company suffers $100m hit

Related tags: Beef

Australian Agricultural Company (AACo), the country’s largest cattle producer, has suffered a AUS $100m hit due to the harsh weather conditions experienced at the start of 2019.

In its results for the year, the business reported a Statutory EBITDA loss of AUS$182.7m, of this it estimates that AUS$107m was down to the Gulf floods which hit the country.

Looking on the positive side, managing director and CEO Hugh Killen said: “While we have room for improvement in our results, when you exclude the Gulf flood event, our underlying operating results are positive year-on-year, despite absorbing an additional AUS$60m in drought related costs.

“Underlying Operating Profit is up more than AUS$37m and our net operating cash flow is an almost AUS$53m improvement from last year.

“Significantly, despite the tough weather, our Wagyu herd – the engine of our business – grew by 3%.”

Expanding further on the flood’s impact, Killen said: “AACo faced weather related events that were unlike anything seen before - 800,000 hectares of our property were affected by floods, while drought conditions on other properties drove up expenses.

“Consistent with our two previous market updates, the impact of the extreme seasonal conditions is estimated at AUS$107m in the FY19 year, including the AUS$60m in drought costs along with an estimated AUS$47m in livestock lost and emergency expenditure incurred in the Gulf flood event.

“While we estimate the loss of around 43,000 head of cattle during this tragic Gulf flood event, I’d like to acknowledge all of my team and our neighbours and friends who are also managing the impacts of this disaster.

“The loss of these cattle will not impact our ability to fulfil supply obligations or the rollout of the premium branded beef strategy.”

Premium strategy

On that strategy, Killen said it gained momentum this financial year.

“We saw growth across key markets in Asia, launched Westholme in Dubai and opened our US commercial office in Los Angeles,”​ he said. “Overall, our Westholme and Wylarah revenue growth is up 6% on last year, while our heritage wagyu full-blood brands are up 41%.

“Wagyu revenue growth in established markets included 26% in Asia, 10% in Australia and 6% in the EU.

“We are well advanced progressing launches in larger markets, demonstrating our unmatched ability to produce the highest quality beef at scale.”

Future-proofing

The business also recently released a sustainability policy that would help guide future decision making and a weather plan.

“We are seeing an emerging narrative in the community about the impact of beef production on the environment,”​ said Killen. “Responsible business is good business and our policy shows a commitment to continuous improvement and innovation in this important area.”

He added that “AACo was progressing plans to mitigate the potential future impact of extreme seasonal conditions”.

“We can’t control the weather, but we can look at how we respond when the weather turns against us,”​ he said. “Some of the things we are examining include how we better handle stock and feed in high-risk areas and reviewing our station business model to further de-risk.

“Tough weather conditions are forecast to continue, at least in the short term, which makes our strategy and response in this area even more important​.”

Related topics: Financial, Livestock, Beef, Australia

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