Operating profit for AACo jumped to AU$67.4 million with a higher margin set at 21.5% from total revenue of AU$313.4 million
In a year of plenty in the broadacre sector, the biggest cattle industry outfit, the Australian Agricultural Company Limited (AACo)(ASX:AAC) has released its fiscal year 2023 (FY23) results, announcing a 35% increase in operating profit to AU$67.4m. The total revenue of AU$313.4m is a 14% increase on the previous corresponding period (PCP).
The result was driven by brand supported price increases in all major markets. It further demonstrates the ongoing success of AACo’s focus on the strategic pillar to deliver the full potential of its brands.
Operating cash flow is down from the PCP to $16.0m, with increased outlay supporting the production of 19% more lightweight kgs. The herd has grown 13% compared to the PCP to 433, 000 head of cattle. This investment in the herd will be realised over time, considering the Wagyu supply chain stretches across several years.
AACo’s statutory reporting requires the inclusion of the unrealised value of the herd at current market rates. However, the company’s supply chain and strategic direction focus on selling branded beef into global markets, which is why operating profit and cash flow are more accurate measures of financial performance.
Net assets have increased to AU$1.6b, largely due to a AU$294.2m increase in the value of AACo’s properties, underlining the strength of the company’s financial position.
Net Tangible Assets (NTA) have grown 14% to AU$2.59 per share.
Managing Director and CEO David Harris outlined, “This is an excellent operating result, illustrating progress against our strategy, particularly considering the challenging global conditions of the last 12 months.
“It’s a credit to our employees across the entire value chain who work tirelessly each day and are seeing the results of their efforts,” CEO David Harris concluded.
Delivering the full potential
AACo outlined its objective with this pillar of the strategy has been to ensure the right cuts are placed in the right markets, at the right times. The strategic allocation of brands such as Westholme and Darling Downs in this way led to a 17% increase in Wagyu meat sales price in the prior year.
Focusing on in-market support and building closer relationships with distributors and chefs has been the key driver behind the uplift in prices and the 18% increase in meat sales to AU$245.0m.
“By working closely with our distributor partners and chefs to better understand our customers, we’ve been able to maximise our performance in this period,” CEO David Harris added.
“Branded meat sales growth of 22% in the key market of North America shows that our hard work and investments made in previous years in this region are paying off.
“We’ve achieved increased prices across our markets, which is a direct result of our branded beef program. We are well placed to selectively expand within our markets based on the opportunities each region presents.”
More focused marketing has been important in FY23, including collaborating with top chefs to increase brand awareness. The Westholme website has also been revamped and now includes details of some of the high-calibre restaurants around the world where Westholme is branded on the menu.
Executing a sustainability framework
Progress on AACo’s sustainability activities continued in FY23.
Among the achievements, AACo reached 62% of its bores being converted to solar, which totals 388, with the full company-wide transition on track for completion in 2024.
The first stage of the asparagopsis trial concluded in the second half of the year.
While other key outcomes include:
- Achieving efficiencies in the supply chain that are the equivalent of avoiding approximately 191,000 tonnes of emissions through the Beef Cattle Herd Management Carbon Project. This generated Australian Carbon Credit Units (ACCUs), with a total value of AU$7.3m.
- Further progress in a Landscape Carbon commitment, which involved collecting a significant amount of soil sample data to continue developing an innovative measurement tool.
- Continued development of a satellite tool to monitor pasture availability and assist with forage budgeting.
Developing natural resources and assets
AACo has begun a major increase in production capacity by expanding Goonoo, south of Emerald in Central Queensland.
“The expansion will allow us to further improve the efficiency of the value chain and boost supply into our global markets,” CEO David Harris outlined.
“It will help us meet the growing demand we are seeing around the world and builds on the strong foundations that we have put in place over recent years.”
AACo is also maintaining its property assets at a level that supports growth in their value, by continuing to build expertise in rangelands management and sustainability, whilst always looking for improvements in pastoral production.
Pastoral properties increased in value by AU$294.2m during the period, improving net assets to AU$1.6b.
AACo’s drive to become a simpler and more efficient business is also continuing to produce results, with costs of production being maintained, with a slight decrease of 2% per kilogram, despite cost pressures over the period, including the high inflationary environment.
Making AACo a great place to work
AACo claims to employ extraordinary people and the drive under this strategic pillar in FY23 has been to enhance the experience of all employees. Improvements in safety and engagement metrics in FY23 show progress towards this goal.
Outcomes include a 37% reduction in lost time injury frequency rates (LTIFR) vs PCP, as well as a 21% reduction in the severity of injuries on occasions when they do occur.
Women now occupy 40% of leadership positions across AACo.
“I’m passionate about continuing to build on our strong culture and to unlock more value by working as a team focused on results, safety and our values. I’m happy with the progress we made this period,” CEO David Harris added.
“Key Executive appointments, including CFO Glen Steedman, made a seamless transition into the organisation in FY23 and this will position AACo well for the future.”
Operating Outlook
An exceptional wet season across AACo’s properties puts the company in a good position, with strong pasture growth expected to lead to increased kilograms produced as cattle move through the supply chain.
According to AACo this will help offset increasing input costs brought about by global inflationary pressures. Supply chain disruptions are also being felt in higher shipping costs, while geopolitical risks continue to create volatility in the global economy.
AACo is monitoring other global factors as well, including the US herd liquidation which has put downward pressure on broader beef prices in some markets.
“We are confident that our strong foundations and focus on our strategic pillars will help us continue to deliver value,” CEO David Harris added. “We are happy with these results that were delivered by our teams across the world. I’m proud of their efforts, their energy, and their enthusiasm this period and will continue to focus on results as we move into FY24,” CEO David Harris concluded.
