A SHIFT in focus to feeding all the cattle it owns and retaining ownership through the supply chain has underpinned the Australian Agricultural Company’s transformation into positive cash flow.
AACo owns properties, feedlots and farms comprising around 7 million hectares of land in Queensland and the Northern Territory, along with a processing plant near Darwin.
The company today announced a full-year statutory net profit after tax of $67.8 million for the year to the end of March 2016, which is a $58.2m increase on the previous financial year.
It’s a huge turnaround from a loss of $39.9m just two years ago.
Operating earnings this financial year have lifted by $18.4m to $14.8m.
Total kilograms of beef sold was up by 96 percent, with total sales revenue increasing by 44.7pc to $489m.
The increased revenue and margin has been driven by one of the most advanced differentiated branding strategies in the beef industry, with AACo’s premium Wagyu brands now recognised as some of the best in the world.
AACo managing director Jason Strong said the fundamental transition to being a supply chain based business had allowed the company to take out the volatility and fluctuations traditionally seen in agricultural businesses.
“While we are pleased with the results we are not satisfied or complacent - this is the start of growth and tractregory,” he said.
The more structured and planned business, with consistency and greater flexibility, had allowed for a positive financial performance through some difficult market and operating conditions over the past year, he said.
In a briefing this morning, Mr Strong outlined the company’s major focus on strengthening its supply chain and ensuring ‘end to end visibility’.
He said AACo had focussed on ‘feeding all the cattle of our own we can’ to create and capture as much value as possible.
Live internal transfer figures demonstrated that commitment, he said.
They have gone from 13m kilograms being transferred in 2014 to 18m in 2015 to 38.5m this year.
“The larger percentage of cattle on our properties are now going through our supply chains to go into our beef program,” Mr Strong said.
“A key part of value creation has been the the branding program and we’ve made significant progress down that path.”
AACo has won gold at the world steak challenge, a grand champion title at the World Wagyu conference and its Master Kobe was named Australia’s best fullblood Wagyu beef brand this month.
The first full year of trading for the company’s $90m abattoir near Darwin, Livingstone Beef, has seen the operation ‘contribute positively’ to the business, according to Mr Strong.
It is now processing 460 to 500 head a day and carcase weights in recent months had been higher than traditionally expected for this time of year.
The increase in total beef and byproducts sold reflects both the significant ramp up in Livingstone and an increase in volume of high end products, Mr Strong said.
The branding strategy was now to be stepped up ‘to tell the story of why AACo beef is so good and share the experience from our iconic cattle properties in the north to some of world’s finest restaurants’.
The results from pilot studies in US restaurants had ‘exceeded our expectations of what might be achievable as we roll out the branding product’ and validated investment to date, Mr Strong said.
Meanwhile, the past year had also seen significant consolidation of external backgrounding and feedlot operations at AACo to provide ‘more control and focus on this key part of the supply chain’.
“We have invested in our own facilities to ensure that control - the best example of that is the facility south of Darwin to allow us to stockpile cattle to ensure continuity of supply to Livingstone,” he said.
And amid a massive national herd reduction, AACo has maintained a stable breeding herd, which Mr Strong said sets the company up extremely well to continue to grow.
“Our breeding cow age has stayed the same, or come down a little, so we have a high quality, high value cow herd base,” he said.