Australian Agricultural Company in meat sales switch from food services to retail
Australian Agricultural Company has had a good start to its financial year, says its chief executive Hugh Killen. See what has underpinned that here.
THE coronavirus outbreak has put only a slight dent in the financial returns of northern cattle and meat producer Australian Agricultural Company.
While cattle sales almost halved to $41.1 million for the six months to September 30 this year compared to $77 million for the same first half of 2019-20, revenue from its meat operations were largely unchanged.
Releasing its half-year results for 2020-21, AACo said its meat sales to September 30 were $102.9 million compared to $105.8 million for the previous corresponding period.
AACo managing director Hugh Killen said cattle sales were due to the continuing turn-off of livestock as a result of drought in Australia’s north.
Mr Killen said there was unlikely to be much respite in second half of the year unless good seasonal rain fell.
“You could argue that a lot of the (northern) region is still in drought,” he said.
“The La Nina influence is yet to come through and we have our fingers crossed for a good season because we deserve one.
“But it will still take time to rebuild the breeding herd.”
AACo reported a 2.7 per cent decrease in meat sales revenue, with production falling 9 per cent.
But prices achieved for the meat rose 14.5 per cent as the business progressed its branded Wagyu beef strategy.
Revenue for its flagship Westholme brand jumped to 22 per cent of all meat sales, compared to 7 per cent for the previous corresponding period.
Margins were also improved by a substantial trimming in costs of $22 million.
Sales of meat to China fell to 8 per cent of total revenue, compared to 15 per cent the previous six months.
Revenue from the rest of Asia rose from 51 per cent of total sales for the first half of 2019-20 to 55 per cent this year.
North American sales more than tripled: from 6 per cent in 2019-20 to 20 per cent for the six months to September 30 this year.
Mr Killen said that while the coronavirus hit the global food services sector hard as restaurants and pubs closed, AACo was able to readily switch to the higher paying retail sector.
“One of the strengths in the first half of this year was our strong global network and partnerships we have,” he said.
“As COVID-19 was hitting us in March and April, we were able to leverage that wide distribution network to move some product out of the food service and into the retail sector.
“The retail markets we have gone into are high quality and pay high rates.
“It’s been a really interesting exercise for us.”
Mr Killen said the loss of Chinese sales was due to the delisting by the Chinese Government of a processing plant in Queensland that processed its meat.
He said AACo responded by redirecting meat sales out of that market to higher value alternatives.
Mr Killen said the financial results for the first six months of the year were positive but some headwinds remained.
“I was very pleased with our first six months in what I would say was an extremely challenging situation,” he said.
“It underlines the resilience of the AACo business.
“But there are some headwinds.
“Many restaurants remain closed or are having to adapt to reduced volumes and it will likely be some time before we see the food service sector return to normal.”
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