August 8, 2007

 

Australia's AAco posts lower net profit in 1H

 

 

Beef producer Australian Agricultural Company Ltd (AACo) reported a net profit of A$5.9 million (US$5.06 million) in the first half of 2007 -- down on the result in last year's period of US$8.5 million.

 

aaCO says its full year results will benefit from a return of normal weather patterns and strong world demand for quality beef. But the stronger Australian dollar and unsure movement of price and volume of US beef to South Korea and Japan are likely to have a negative impact.

 

The first half result in 2006 included a US$6 million tax benefit related to the sale of AACo's Wrotham Park station.

 

Operating earnings before interest and tax (EBIT) rose to US$12.5 million, from US$7.5 million, due to a lower cattle valuation markdown and more cost-effective herd management.

 

AACo managing director Don Mackay said full year results will be heavily influenced by market prices at the year-end.

 

Any of several competing influences could affect short-term cattle prices through to December.

 

Winter rains in June would assist production in Queensland and some parts of the Northern Territory and help cut supplementary feed costs in the second half.

 

Demand for beef around the world remained very strong and was outstripping supply, thus, drawing positive views for AACo.

 

AACo was covered against higher grain prices well into next year but costs would rise as more expensive grain was added to AACo's inventory.

 

Mackay said the first half of the year had been a period of consolidation for the company after its sale of Wrotham Park and the acquisition of the Anthony Lagoon and Evan Downs stations and the Westholme Wagyu stud.

 

The general cattle market had been quite disappointing although AACo's prices had held up quite well because of forward selling.

 

Southern cattle producers had swamped the market with cattle in late 2006, following severe drought.

 

However, general parity had now been broadly re-established.

 

Although seasonal conditions had been average or above average on most of AACo's properties, late rains in the north delayed mustering and some sales.

 

AACo had also held back selling some grass-fed cattle into the soft market.

 

Wholesale beef revenues had grown strongly, but marketing and new factory set-up costs had impacted first half profit.

 

AACo's revenue for the six months to June 30, 2007 rose to US$124.2 million from US$85.6 million in the prior corresponding half.