Has the Australian Agricultural Company Ltd (ASX:AAC) share price bottomed?

Shares in beef producer Australian Agricultural Company Ltd (ASX: AAC) – also known as AACo – were 4% up to $1.18 on Wednesday, following the release of its FY18 results.

The company issued a preliminary report in April, flagging non-cash charges of around $60 million in relation to its Livingstone Beef processing facility, and a statutory EBITDA loss estimated between $30 million and $40 million.

Consistent with forecasts, the company reported operating EBITDA of $14 million, statutory EBITDA loss of $35 million, and a statutory net loss of $103 million, compared to a profit of $72 million in FY17.

The real surprise is Livingston Beef. The plant weighed on the budget with a $22 million operating loss, and to avoid further damage the company resolved to suspend processing operations as soon as compatible with employee and customer commitments. This will result in a larger-than-expected one-off write-down of $75 million.

AACo declared the facility will be maintained at a level that enables an efficient plant restart should market conditions improve.

Results from the premium segment (AACo’s mid-range branded beef) were also disappointing, with revenue down 34% to $64 million. The company will most likely refocus its business on the luxury/prestige brand segment, the only one that saw revenue grow by 1% to $177 million.

CEO Hugh Killen said conditions in the first half of FY19 remain challenging, and management is focused on continued financial discipline and driving internal cost efficiencies through efficient feed use and cattle movements.

The company maintains its balance sheet is robust, with comfortable headroom remaining within existing bank facilities. Net debt amounts to $348 million, with gearing at 26%.

Foolish takeaway

With the stock trading 40% below its price this time last year, some may be tempted to bet that AACo has bottomed out.

However, I’m afraid the company is still far from making a turnaround. Even the decision of shutting Livingston while continuing to pay for its maintenance is not very promising in terms of a decisive reshaping of the business.

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