Beef producer Australian Agricultural Company Ltd (ASX: AAC) has almost doubled its first-half operating profit and says a tightening of beef supply globally could help balance out increased cost-of-living concerns in the second half of the year.
The company said while there were "unstable market conditions" in the first half, it had executed well across its three strategic focus areas of "better beef, unlocking the value of the land, and partner and invest''.
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Bottom line looking good
The company's revenue for the first half was $239.9 million, compared to $195.6 million in the prior corresponding period (pcp). The operating profit came in at $39.8 million, compared to $20.2 million in the pcp.
The company said in a statement to the ASX that it was a solid result.
Operating profit, which rose 97% versus the previous corresponding period and is AACo's highest half year operating profit, was driven by favourable beef and cattle sales margins and supported by a strategic program of earlier live cattle sales compared to the prior period. Good productivity outcomes driven by improved land condition and station-based cattle management activities meant AACo was able to capitalise on increased demand and higher prices for live cattle.
The company's average beef price per kilo grew 7% over the previous corresponding period to $18.62 per kilogram, driven by the company's "sophisticated in-market sales and distribution strategy''.
Production costs remained steady, down 1% to $2.46 per kilogram.
AACo managing director David Harris said he was pleased with the progress against the company's strategy, which was released six months ago.
There are multiple streams of work underway against those priorities, which will help drive company growth into the future. Our excellent financial results this period further highlight the ability we have to leverage our integrated supply chain to maximise performance. They also demonstrate the different avenues we can take to achieve consistent positive outcomes and create long-term value.
Increased investment to drive profits
AACo said it would continue to invest in its world-class Wagyu herd, which would "improve the genetic profile and overall efficiency of AACo's herd by increasing the proportion of Wagyu animals, as part of the Better Beef program''.
That is expected to result in both immediate gains and long-term value creation through improvements in overall quality, and a greater number of animals better suited to the company's premium brands and high-paying markets.
The company said it had also progressed its landscape carbon project at Glentana Station in central Queensland with the installation of infrastructure, which would help with the generation of Australian carbon credit units.
On the outlook, the company said the market remained "dynamic", with cost-of-living concerns and a downturn in high-end food services being experienced in some key regions.
The company added:
However, market reports suggest a tightening of global beef supply could balance out these price pressures, and AACo is well positioned to manage evolving circumstances through its global distribution network.
AACo did not declare an interim dividend. The company was valued at $867.9 million at the close of trade on Wednesday.
