February 18, 2009

Australia's largest cattle rancher, Australian Agricultural Company Ltd (AAco) is reorganising its operations as consumers turn to cheaper beef cuts due to the global recession.

AAco has decided to sell three cattle stations in Queensland and buy another two in the Northern Territory in order to lower its dependence on grain-fed beef production.

The sale price for the three stations, including 62,000 branded cattle and plant and equipment, is A$152 million.

AAco CEO Stephen Toms said proceeds from the sales would be used to reduce debt, release working capital to restock and make use of extensive Barkly feed pools as well as positioning the company to take advantage of market opportunities as they arise.

AAco's purchase of the two cattle stations from Dunkeld Pastoral Group will cost A$105 million. The two stations comprise a total of 343,442 hectares and have a carrying capacity of over 70,000 cattle.

The stations are perpetual pastoral leases, and they carry facilities for quarantine yards for live export, intensive feeding, cropping for feed supplies and have potential for alternate agriculture due to high rainfall. The two stations are expected to help boost the company's position in the live cattle export market.

The restructuring move follows after major shareholder, Futuris Corp Ltd., sold a 19.9 percent stake in the company and plans to sell its remaining 23 percent.

Toms said consumer sentiment indicates that the beef market is moving to lower-cost products over the short- to medium term, therefore the company will move toward less costly grass-fed production.

Meanwhile, AAco is also developing new markets in China, India, the Middle East and Europe while continuing to service the high-end, grain-fed Wagyu beef market in which the company holds a 30-percent share in, according to Toms.

US$1 = A$1.56343 (Feb 18)