Australian Agricultural Co (AAC) announced today that its annual profit has been shaved by 64% due to the drought and the high value of the Australian dollar.
AACo said its net profit after tax fell to $3.6 million from $10.1 million the previous year, despite a rise in earnings before interest and tax to $31 million from $22 million in 2006.
AACo said the high value of the Australian dollar affected export prices during 2007 and the drought had driven up the cost of grain while forced sales of cattle had caused oversupply, and therefore lower cattle prices.
Nevertheless, the world's biggest cattle company says it has faired fairly well in a tough market and that the start to 2008 looks promising.
"If the cattle price keeps going like it is and if grain prices weaken slightly then we're probably set for a pretty good year," AACo chief financial officer Stephen Toms was quoted by Reuters.
"The cattle herd is in very good condition and the 2008 season at this early stage looks reasonable," said the company in a statement.
AACo said it plans to double its current herd of 500,000 cattle by 2015.
Also, according to AACo chairman Nick Burton Taylor, the oversupply problem that impacted 2007 is now "out of the system".
The decision by rural services conglomerate Futuris Corp to sell its 43% stake in AACo last October created tensions in the company and presented AACo as a possible takeover target.
However, AACo says the two companies are now working together to produce a resolution of the sale and expressions of interest from various parties are being explored.
AACo's revenue from operating activities for the year rose 27 per cent to $248.98 million, mostly as a result of greater sales of branded beef.
The company said a final dividend would be advised at the company's annual general meeting – once seasonal conditions were better known – and paid in October 2008.
Shares in AACo fell by 7 cents or 2% today to close down at $2.98.
