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AACo Reduces Losses

20 November 2014

AUSTRALIA - Australian beef processor AACo made a loss of A$13.6 million in the first six months of the current financial year.

However, the result was a 57 per cent improvement on the 2013 period where the company saw a loss of A$31.6 million.

During the six months to September this year AACo saw sales of meat rise by 38 per cent from A$83.9 million to A$115.5 million.

However, cattle sales fell by 64 per cent from A$78.5 million to A$28.2 million.

In the report, the AACo directors said: “The first six months of the 2015 financial year, sees our company in a state of transformation.

“After a difficult 2014 which necessitated destocking activity in the northern regions, the start of this financial year has seen improved pastoral and market conditions combined with a refreshed strategy and strengthened balance sheet.

“This period has witnessed the laying down of basic building blocks, on top of which, we seek to build a profitable and scalable business model.”

The directors added: “From an operational perspective, there have been some pleasing developments in the half year. Sales of AACo branded beef are up over 38 per cent compared to the prior corresponding period, driven by increased volumes at improved prices in both our Wagyu and Shortfed programmes.

“Branded beef sales now account for over 76 per cent of total revenue (compared to 50 per cent in the prior corresponding period) and is in-line with our stated objective of transitioning towards a vertically integrated business.

“Selling more beef compared to cattle, combined with effective branding and marketing initiatives will enable us to derive more value and reduce our exposure to volatile domestic cattle markets.

“As our meat sales are generally transacted in USD, the recent depreciation of the AUD has been a positive development for the business.

“Cattle sales have substantially reduced as a result of a conscious decision to reduce the number of head sold to take advantage of improved pasture conditions. This reduction in sales combined with increased purchasing activity has led to a substantial rebuilding of our Grassfed herd.

“The approach taken to this rebuilding phase is now more focussed and we are ensuring there are defined terminal markets for cattle purchased and a reduction in the level of speculative cattle trading activity.

“Where cattle sales have taken place, for example our live export sales, they have generally been into stronger markets than were available last year.

“AACo will have the ability going forward to reduce our vulnerability to domestic price risk by processing cattle through the Livingstone Beef facility and thus reducing the company’s reliance on volatile domestic cattle prices.”

TheMeatSite News Desk

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