Live export ban costly for AACo
AACo slumped to an after-tax loss of $8.4 million last year, 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 next year, , lowering demand for Australian beef.
AACo's managing director, David Farley, said the deliberate disruption of the live export trade, combined with the rising dollar, "took the commerce out of the north".
This week the live export-geared Killarney Station, in the Northern Territory, was placed into receivership by NAB. Mr Farley said Killarney was "a beautiful property" and the receivership was a consequence of the 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 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 the Trade Minister, Craig Emerson, but "what Australia has to do is start being responsible with the governance surrounding its agricultural industries in the north".
Mr Farley said after completing a three-year turnaround at AACo, the loss last year "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.
Australia was well-positioned for export growth, taking advantage of the severe drought in the US which had depleted North American herds, he said.
With 30 million head, Australia was "just about the only country that's building our herd".
Frequently Asked Questions about this Article…
AACo blamed about $50 million in write-downs on the federal government's temporary mid-2011 ban on live cattle exports to Indonesia. The company recorded 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 largely attributable to impairments.
The ban disrupted trade to Indonesia, which AACo's managing director said 'took the commerce out of the north.' The disruption contributed to property value write-downs and was cited as a factor in Killarney Station — a live-export‑geared property in the Northern Territory — being placed into receivership by NAB.
Yes. The article says the federal government included a provision for compensation in the most recent budget. AACo welcomed that move and has indicated a negotiated solution would be preferable to litigation, noting a number of class actions are under way.
AACo boosted operating cash flow by $63 million last year and built a record herd of 681,700 head weighing 94.6 million kilograms after choosing to grow rather than trade its cattle. Management said the business delivered operationally following a three‑year turnaround, even though the accounting loss affected financial results.
AACo's managing director predicted beef prices would rise after recent rains. He also said Australia was well-positioned for export growth, taking advantage of a severe drought in the US that had depleted North American herds, and noted Australia was one of the few countries building its herd.
AACo expressed confidence in the long-term future of the Indonesian market and said it was engaging with Trade Minister Craig Emerson. However, the article also notes the Indonesian government set a target to become self-sufficient in beef by the following year, which could lower demand for Australian beef.
Killarney Station — described as live-export‑geared — was placed into receivership by NAB and management said this was a consequence of the ban. For investors, this underscores that heavy exposure to live exports can increase operational and credit risk if policy or trade disruptions occur.
The article highlights that government action (the temporary live export ban), changing government policy in export markets, and currency moves (a rising dollar) can materially affect agricultural companies. Investors should consider regulatory and policy risk, management's operational response, potential compensation or legal outcomes, and how exposed a company is to specific export channels when evaluating such stocks.
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