AACo has delivered substantial proof that its shift from cattle producer to vertically-integrated beef operation is delivering results.
In a first-half earnings call, AACo’s chief executive, Jason Strong, said that for the past 18 months, while talking about the transition, “we were asking everyone to believe, to an extent”.
But the market no longer needs to believe, Mr Strong implied in an update on the first half of the 2016 financial year, which ended in September.
Operating EBITDA (earnings before interest, tax, depreciation and amortisation) for the half is in the $8-$12 million range, compared to an $8.4m loss in the same period last year. (Figures for the last half are as yet unaudited. Audited figures will be available in November.)
Statuatory EBITDA for the half is in the $90-$100 million range, helped by a rise in cattle price and herd valuation, against a loss of $4.5 million in the same period the previous year.
The increased earnings reflect the company’s success in switching from selling cattle, with all the market dependencies that involves, to capturing the value of its herd when converted to beef.
Beef sales as a percentage of revenue have risen from 47 per cent to 80pc, year on year.
“Three years ago we put about 26-27,000 cattle through our 1824 program, the 100-day grainfed program; only about 1500-2000 of those were our own,” Mr Strong said.
“This year we’ll put 60-odd thousand through that program, and 50,000 will be our own.”
AACo’s properties are outside the worst of the drought, and the company has managed to maintain 170,000 breeders despite the liquidation of female numbers occurring in drought-affected areas.
The Livingstone Beef abattoir at Darwin broke through the 350-head-per-day throughput needed to break even in August, and by September was tracking close to 400 head per day.
The plant is processing 6-7 cuts from carcasses, as well as mince, and has established markets for the cuts in Korea and Japan, along with supplying capacious US demand for mince.
“The business has now transformed from a pastoral operation to a vertically-integrated beef company,” Mr Strong said.
AACo has also confirmed it has contracted to buy the 46,800 hectare Thorner Station in Queensland for $4.1 million. Thorner Station is surrounded by AACo's Headingly Station.
Headingly supplies Wagyu cattle for the grainfed business.
AACo says it has not exercised its option to renew the Tipperary Station agistment agreement and has now exited the property.