AACo blames slump on live cattle ban
AACo slumped to an after-tax loss of $8.4 million in 2012, a loss mostly attributable to impairments, with a $41 million reduction to the value of its northern Australian properties after the trade with Indonesia was disrupted, and another $8.6 million hit to the value of its trading cattle.
The live export ban, which lasted a month, was imposed after an ABC Four Corners expose of cruelty at some Indonesian abattoirs. After the ban was lifted the Indonesian government set a target to be self-sufficient in beef by 2014, lowering demand for Australian beef.
AACo managing director David Farley said the deliberate disruption of the live export trade, in combination with the rising dollar, "took the commerce out of the north".
Just this week the live export-geared 5414 square kilometre Killarney Station, in the Northern Territory, was placed into receivership by NAB.
Mr Farley said the Filipino-owned Killarney was "a beautiful property" and the receivership was a consequence of the live cattle ban.
He welcomed the government's provision for compensation in the last budget. "To do that to a federal budget admits some form of malfeasance," he said, adding that a negotiated solution was preferable to litigation, with a number of class actions under way.
Mr Farley said AACo had confidence in the long-term future of the Indonesian market and was engaging with Trade Minister Craig Emerson, but said "what Australia has to do is start being responsible with the governance surrounding its agricultural industries in the north".
The government had to decide whether to recapitalise the smaller end of the pastoral industry in the north, he said, "or are they just going to accept they brutalised an industry?"
AACo shares fell 3 per cent to $1.215 on Thursday. Mr Farley said after completing a three-year turnaround at AACo, the 2012 loss "doesn't give me the chance to say I've delivered financially, but I know I've delivered - the team has delivered - operationally".
Last year AACo boosted operating cash flow by $63 million. It built a record herd of 681,700 head weighing 94.6 million kilograms at the end of the year, after deciding to grow rather than trade its cattle.
Mr Farley predicted beef prices would rise after recent rains.
He said Australia was well-positioned for export growth, taking advantage of the severe drought in the US which had depleted North American herds.
With 30 million head, he said, Australia was "just about the only country that's building our herd".
Frequently Asked Questions about this Article…
AACo says the main cause was the federal government's temporary ban on live cattle exports to Indonesia in mid‑2011. The disruption led to impairments including a $41 million reduction in the value of its northern Australian properties and an $8.6 million hit to the value of its trading cattle, contributing to an after‑tax loss of $8.4 million for 2012.
According to AACo's managing director, the ban — combined with a rising Australian dollar — ‘took the commerce out of the north.’ As a direct consequence, the live‑export‑geared 5,414 km² Killarney Station in the Northern Territory was placed into receivership by NAB, and several northern assets experienced significant value impairments.
AACo says it remains confident in the long‑term future of the Indonesian market and is engaging with Trade Minister Craig Emerson. The company noted, however, that Indonesia set a target to be self‑sufficient in beef by 2014 after the ban was lifted, which could reduce demand for Australian beef in the near term.
On the day reported, AACo shares fell about 3% to $1.215. Despite the 2012 loss driven by impairments, the company boosted operating cash flow by $63 million over the prior year, which management highlighted as an operational improvement.
AACo reported building a record herd of 681,700 head weighing 94.6 million kilograms at year end, after choosing to grow rather than trade its cattle. Management also said recent rains could drive beef prices higher, and that Australia is well positioned for export growth because of a severe drought in the US that has reduced North American herds.
The article notes the federal government included a provision for compensation in the most recent budget, which AACo's managing director welcomed. He also said a negotiated solution was preferable to litigation, and mentioned that a number of class actions are underway related to the disruption.
AACo attributed part of the pressure on northern commerce to a rising Australian dollar, which hurt competitiveness. At the same time, the company sees opportunity from international conditions — specifically a severe US drought that depleted North American herds — positioning Australia for potential export growth.
Key figures from the article: AACo recorded approximately $50 million in write‑downs related to the export disruption (including a $41 million hit to northern properties and $8.6 million to trading cattle), reported an after‑tax loss of $8.4 million for 2012, increased operating cash flow by $63 million year‑on‑year, and saw its shares fall about 3% to $1.215 following the announcement.
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