Investors punished the beef business Australian Agricultural Company on Wednesday with its shares falling 7.4 per cent, after it reported a 7.9 per cent drop in sales revenue and said it faced challenges including a higher Australian dollar, higher input prices including feed costs, and increased competition in some markets.
While total sales revenue for the first half of fiscal 2018, of $197.2 million, was down 7.9 per cent on the same period last year, the company said this change "in part" reflected "a strategic decision to transition to internal supply chains".
AACo recorded operating EBITDA (earnings before interest, tax, depreciation and amortisation) of $16.1 million for the six-month period, up $2.2 million on the same period last year.
??????Shares in AACo, which in the middle of the year were just a few cents shy of $2, dropped 11.5?? on Wednesday to close at $1.44. The company has a market capitalisation of about $868 million and a cattle herd of about 550,000 head.
AACo also reported a statutory EBITDA loss of $36.5 million for the period, and said this included "a market to market of livestock inventory valuation". AACo said the "inventory revaluation" occurred on September 30, which coincided with a low level for cattle prices as measured by the Eastern Young Cattle Indicator index, of $5.05 per kilogram. The index, which is based on cattle prices at saleyards in eastern Australia, has since risen to $5.78 per kilogram.
The company's chairman, Donald McGauchie, said the results demonstrated that the company was making progress on its strategy.
"AACo has come a long way from being a cattle company. We made a decision that to drive shareholder value we had to become a branded business. Tough - but highly considered - decisions were made as we have executed on the strategy," he said.
"While there are some external headwinds, we are pleased with the traction we are achieving. Our priorities now are completing our executive line-up, continuing the investment in our systems and processes and ensuring that we continue to improve performance across the business," he said.
In a big day for AACo, whose origins can be traced to its establishment as a land development company in NSW in 1824, the company also told the ASX it had appointed Jessica Rudd, daughter of former prime minister Kevin Rudd, as a non-executive board director, effective immediately.
Ms Rudd is a lawyer, author and founder of the online retailer Jessica's Suitcase, which AACo described as "an online retailer of Australian lifestyle products into China".
Ms Rudd said she was pleased to be joining the company. "Australia's oldest company is also one of its most innovative and I join the board at a time when the path from Australian paddock to global plate has never been faster. I look forward to being a part of this company's future," she said.
