A BIG season across northern Australia is driving a business rebound for beef giant Australian Agricultural Company (AACo) - including valuable earnings from its new cropping interests.
With help from a well-timed 177,516 head cattle buying spree early last year and strong global beef prices, AACo's net profit after tax jumped 1000 per cent to $10.5 million in 2011 (from just $904,000 in 2010).
Even the costly export challenges of a bullish Australian dollar and the mid-year ban on live cattle exports to Indonesia have not greatly slowed AACo's new-found momentum, although the company's cashflow turnaround is still not enough to support dividend payments to shareholders.
AACo hasn't paid a dividend since 2004-05 and incurred two years of consecutive losses prior to 2010.
Managing director David Farley said new export markets opening up in Vietnam, the Philippines, North Africa and Europe as well as record low herd numbers in drought-hit USA were creating healthy opportunities for the company, which declared a 40pc lift in earnings before interest tax, depreciation and amortisation (EBITDA) of $58.1m for 2011.
He said Indonesia's population growth and rising per capita beef consumption was likely to see it stay a solid live cattle and processed beef market for AACo well into the decade despite that nation's plans to scale back its reliance on live imports.
"There are 245m people on 1900 islands in Indonesia who like to eat fresh disease-free meat," he said.
"GDP is rising but refrigeration is not so well established across the country - I think we'll see a balance of boxed beef and live exports for 10 years."
AACo exported 80,000 live cattle last year - almost 5000 more than 2010, despite the federal government-enforced temporary ban significantly disrupting sales, and costing the company $5m to $8m in losses to date.
Total live cattle revenue rose 47pc to $231m.
Thanks to a second bumper seasonal year its pastoral division, including cropping operations, proved a particularly strong performer achieving 52pc revenue growth.
Ideal cropping conditions meant a strategic move into cotton, sorghum and wheat contributed about 20pc to the company's net earnings with its cropping program generating a handy $12m in revenue.
Cropping earnings from AACo's properties near Dalby and Surat in southern Queensland and "Goonoo" near Emerald in Central Qld, represented almost a 100pc increase on 2010.
"While our real focus and core competency is in breeding and fattening, we can't ignore the opportunities offered by a good season - the management team really worked on making the most of last year's good conditions," Mr Farley said.
AACo harvested 2430ha of mostly dryland cotton, 2950ha of sorghum and 2920ha of wheat last year, with yields above the industry average despite flooding last summer.
This summer's program includes 2500ha of irrigated cotton and 1000ha of sorghum.
Excellent pasture growth across the company's AACo 19 cattle stations in Queensland and Northern Territory fuelled the company's herd expansion and weight gain program, producing the company's best ever calving result of 74pc, translating to 156,282 brandings.
The soil moisture outlook suggested current seasonal conditions would provide good feed conditions for the next six to eight months.
AAco's cattle inventory increased 15.3pc to 665,591 after a big store cattle buying program and the $27m purchase of 53,351 Tipperary Group Brahmans.
Total kilograms of beef produced was also up 26pc on the previous year to 80.7m kilos with the average selling price climbing to $961 a head compared to $500 to $600/head for the average purchase price of breeders and traded cattle.
"History is saying we bought well," said Mr Farley.
"By growing the herd and maximising weight gain in 2011, AACo is now in a strong position to capitalise on the current global beef shortage and increasing cattle and beef prices."
He said older cows had been culled and a lot more calves were expected to be produced from the younger breeding herd in 2012-13, negating the need for another big store cattle buy-up.
To accommodate the growing herd, AACo acquired three extra properties in the Tipperary deal and has taken on 600,000ha of agistment country on Qld and NT properties.
Mr Farley said based on the company's current cashflow outlook it should be generating enough operating surplus to pay a dividend in early 2013.
Email a friend