The Australian Agricultural Company Ltd (ASX: AAC) share price is flat at $1.12 after it handed in its full year results for the year ending 31 March 2019 today. Below is a summary of the results with comparisons to the prior corresponding period:
- Statutory loss $148.4m, down 45%
- Operating loss of $22.9m, compared to an adjusted operating loss of $13.5m in prior year
- Adjusted operating profit of $23.7m, up 34% (excluding Gulf flood and drought costs)
- Meat sales of $246.3m, down 26%
- Cattle sales of $117.8m, up 151%
- Total revenue $364.1m, down 4%
- Net finance costs $15.8m, 9% lower
- Gearing ratio of 30%
At $1.12, the AACo share price is actually below its August 2004 levels, which doesn't come as a great surprise looking at today's results. The company is losing money and has $361 million in net debt, although it reports it made an operating profit of $23.7 million on an adjusted basis (backing out flood costs). However, for a Queensland-focused agricultural company it's hard to argue that flood costs should be treated as a one-off. The company also flagged that the 2018–19 drought cost it approximately another $60 million.
On the positive side, it reports that demand for Wagyu beef is soaring and that this herd is its "growth engine" with plenty of potential. Global demand for beef is generally on the rise from the growth markets of Asia in particular, which represents a tailwind of sorts for the business over the long term as it should feed through into steadily rising prices.
However, you can probably guess I'm not a buyer of AACo shares for any number of reasons.
I'd prefer to focus on shares with better economics that are not so exposed to the unpredictable Queensland weather….the two below I honestly believe tick the right boxes…
