No interim dividend for shareholders in the Australian Agricultural Company despite a small improvement in earnings as the company wrung higher returns out of lower sales volumes.
The company revealed an improved trading profit of $38.3 million as the operating margin rose 2.5% to 23.4%.
Directors said the small improvement followed a 25.9% improvement (20.1% constant currency basis) in average meat sales price a kilogram.
That, directors said in the commentary, was a result of the company’s continuing focus on its premium brands and strategic market allocation.
Revenue from meat sales rose 18.9% in the September half to a total of $122.3 million in meat sales revenue, despite lower volumes sold.
Statutory net profit after tax was $51.6m million on an EBITDA $92.3 million which were both down on the prior period as a result of lower fair value adjustments this period, as cattle prices in Australia normalise (ie, fell).
While recognising the positive result newish CEO David Harris said: “Our focused effort on the five pillars of our strategy is continuing to produce positive results, despite global economic uncertainty.”
“Our margins are higher, we’re continuing our proactive sustainability agenda, we have advanced several key projects and we’ve been able to do more with less, producing 18% more live weight kilograms while only increasing production costs 1%.
“I’m proud of our people for their hard work in delivering these strong financial results, and their passion and dedication in producing the premium Wagyu that AACo is known for.”
Looking ahead Mr Harris said global economic conditions “have shifted significantly vs pcp, with rising inflation and interest rates impacting the cost of living.”
“The IMF is forecasting that 2022 and 2023 will record the lowest global economic growth rates since the GFC.”
Regarding biosecurity, the potential risks and challenges of Foot and Mouth Disease and Lumpy Skin Disease remain low, Mr Harris said but AACo will continue watching for any developments.
“We’re also monitoring the heavy drought conditions and impact on herd size in the US, which may result in global opportunities as it coincides with the ongoing rebuild of herds across Australia.
“We are wary of the evolving global economic conditions but will stick to the fundamentals and the strategy that have served us well through other challenges over recent years.
Investors marked down the shares by 5% to $1.63.
