Under Australian accounting standards the result was significantly adversely affected by a non-cash $43.2 million pre-tax writedown of the market value of the company’s 676,000-head herd, due to the slump in domestic cattle prices.
A company spokesperson said the ongoing effects of the federal government’s June 2011 suspension of live cattle exports to Indonesia and below-average seasonal rainfall in northern Australia had significantly depressed domestic cattle prices.
The majority ($35.3 million) of cattle written down in value were long life-cycle breeding cows and young grower cattle. Most were not intended for immediate or near-term sale.
Managing director David Farley said AACo had increased both cattle sales and wholesale beef revenue in the three months, however domestic prices continued to be depressed.
“AACo sold 41,186 head for the quarter, up from 29,646 head in the first quarter of last year to drive operating cash flows which were in line with the prior corresponding period,” he said.
“The drought and the impact of the suspension of live exports to Indonesia continue to be felt in domestic cattle markets.
“With the biggest herd in Australia, livestock values have a significant impact. A 10c change in live-weight-per-kg trading cattle prices equates to an $8.7 million impact on AACo’s pretax profit.
“The local oversupply and depressed cattle prices is at odds with continuing high global beef prices. This disparity validates AACo’s vertical integration strategy and the decision to build a Darwin abattoir to capture these global prices."
