AACo’s losing cash
BEEF producer Australian Agricultural Company ( AACo) has warned of big losses as the 194- year- old firm is hit by higher cattle prices and a buoyant Australian dollar.
Brisbane- based AACo said yesterday it expected to report a loss before tax of between $ 30 million and $ 40 million in the 12 months to March 31, compared to a profit of $ 133.2 million the year earlier.
The company’s Livingstone abattoir, 50km south of Darwin, is forecast to report an operating loss of between $ 18 million and $ 22 million. The company’s shares closed down 8.2 per cent to $ 1.12 yesterday.
New AACo chief executive Hugh Killen said the company had hired advisory firm Deloitte to conduct a strategic review of the plant.
“We realise the company’s financial performance has been below expectations,” said Mr Killen.
He said AACo would transition to selling more cattle rather than beef as part of the transition.
AACo, founded in 1824, has in recent years attempted to move from a traditional pastoral company to one focused on luxury processed beef brands for export. The higher Australian dollar makes such exports less attractive in overseas markets.
“The company has faced external challenges during the year, including a higher Australian dollar and elevated cattle prices,” Mr Killen said.
Any shortfall in meeting customer demand had to be supplemented by purchasing cattle from third parties, meaning higher cattle prices had hit its bottom line.
The company came under fire from investors on a conference call yesterday for strategic missteps that had resulted in its poor financial performance.
Its shares have slumped more than 42 per cent since June.
“We have a remarkable collection of assets including properties, cattle and brands,” Mr Killen said. “The new management team is committed to a simpler and more profitable business.”
He said the company’s properties and cattle herd would not be part of the Deloitte review. The company will release its full- year result in May. Hunter Green Institutional Broking director Charlie Green said the Darwin abattoir had been a drag on the company’s operations, resulting in a likely decision to sell or close the facility.
“How can you lose $ 40 million in an industry that is supposed to be in the purple patch?” said Mr Green. “Hugh Killen has inherited a company that has not been travelling well.”
He said the decision to transport cattle north to the Darwin abattoir had been a strategic error because of the cost of shipping them from Queensland.