Australian Agricultural chief quits as beef group restocks
The boss of Australia's biggest beef cattle producer has quit the company after reaching a "mutual" agreement with its board.
The Australian Agricultural Company surprised analysts on Wednesday when announcing its chief executive of four years, David Farley, had resigned. The decision followed a board meeting on Tuesday night, and after AACo posted a $46.5 million loss in the quarter to March 31.
In a statement to the stock exchange, AACo chairman Donald McGauchie said the new CEO would need a "different skill set to lead the company in its next stage of growth".
Agribusiness analysts interpreted that as someone being capable of delivering cost savings, with cuts expected to come from trimming the middle management, which several analysts said had become "a little bit fat".
AACo's share price has also varied little in Mr Farley's time at the helm. When he began his tenure in December 2009, it was trading at about $1.34. At Wednesday's close the shares were $1.15, having shed 5¢, or 4.2 per cent, in the hours after the resignation announcement.
Agribusiness analyst Paul Jensz, of Phillip Capital, said the company was entering a "new phase".
"They have had a lot of ructions with the owners, with the board, and David, I think, was the right sort of personality to sort all those things out. He's good at telling the big-picture strategy. But I think you need a different person to drive costs out and to run this as a lean group and getting into the exports markets."
AACo attributed its first-quarter loss to a writedown on the value of its 676,000-strong cattle herd, which was due to low rainfall and the impact of a suspension of live exports. Mr Jensz said the company had battled a high Australian dollar and a correction in land prices, particularly in Australia's north.
"They were rocketing up quite high until five years ago and now they have been coming back," he said, adding that AACo's net tangible asset backing had fallen from about $2.75 to $1.80 in that time.
Nevertheless he was surprised the company was unable to get itself into a better financial position.
"They've had two or three good growing seasons and they still weren't able to deliver free cash flow. That's the real conundrum for me.
"Yes, they had to build up their breeding herd, they have had to deal with a lot of other issues. But I would have thought after three tremendous seasons you should be able to deliver some free cash flow."
AACo's chief financial officer Craig White has been appointed interim CEO while the company looks for a permanent replacement.