AACo reports fall in profit on lower cattle prices

Australian Agricultural Co, majority owned by under-fire British billionaire Joe Lewis, suffered a drop in profits due to ongoing oversupply of cattle.

Tottenham Hotspur Football Club owner and AACo majority owner Joe Lewis. Picture: Angela Weiss

Australian Agricultural Company, the nation’s biggest wagyu exporter, says its decision to move away from selling cattle and into selling premium branded beef instead has been vindicated by the plummeting prices for livestock, even as it posted a 21 per cent drop in first-half profit to $30.1m.

Live cattle prices have slumped 50 per cent in the past six months, and beef prices for AACo fell 5 per cent.

AACo’s cashflow fell by a quarter to $2.6m, but total revenue rose 2 per cent to $167.1m and there has been little sign that cost-of-living pressures being felt across the globe are having much impact on demand for the high-end wagyu beef.

“We’ve grown volume, we’ve got great demand for the product and we largely held the price,” Mr Harris said. “Live cattle sales ­prices are challenging, but the ­results articulate that our strategy is working – we’re largely decoupling ourselves from a significant drop in livestock prices.”

Cattle prices are now at four-year lows due to high herd numbers in key cattle countries Australia, the US and South Korea.

Falling prices led to a $105.5m statutory net loss for AACo because it is required to provide a mark-to-market value of its herd – leading to a drop of $175.5m, even though most won’t be sold for another three years and even then, not as live cattle.

AACo said the key metric of cost per production of kilogram of beef fell during the period, by 5 per cent.

AACo has been in a swirl of controversy in recent times for reasons unrelated to the challenging market for livestock, with majority shareholder, Bermuda-based British billionaire Joe Lewis, facing insider trading allegations in the US.

The charges Mr Lewis faces include that he shared confidential information about the impact of 2019 Queensland floods with his pilot. Mr Lewis, who made most of his fortune betting on currency, denies the allegations.

Mr Lewis now owns 52.09 per cent of AACo, with his creep up the register no doubt angering Australia’s richest man, Andrew Forrest, who is also a significant shareholder.

AACo has always been the plaything of the rich and famous, with the Blundy and Holmes a Court families also big shareholders in the past.

Just why is a good question. The company hasn’t paid a dividend in 15 years and told analysts on Thursday today it was not planning a share buyback.

The appeal most likely lies in its land, with the company owning about 1 per cent of Australia’s land mass and having significant ranches in the north.

Mr Harris said he could not focus on headlines about ownership struggles and was committed to building out on AACo’s premium branded beef strategy.

“I’ve got great support from the board on the strategy and we’ve got a lot of things to do and areas we want to continue to improve on, and we’re pretty busy doing that,” he said.

One of those areas is workplace culture, with AACo recently facing allegations of bullying and alpha culture. “We try very hard within the business to create a culture where everyone wants to work here, and that needs to be a safe culture, and a respectful culture,” Mr Harris said.

AACo shares rose 3 per cent to $1.36 on Thursday.

Originally published as AACo reports fall in profit on lower cattle prices