Release Date: November 14, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Australian Agricultural Co Ltd (AAYYY) reported a significant increase in total sales revenue, up by $28.5 million to $195.5 million, driven by higher meat sales volumes.
• The company achieved a positive statutory net profit after tax of $23.6 million, largely due to a $34 million unrealized mark-to-market adjustment of the herd.
• The company's branded Wagyu meat sales increased by 30%, with a 14% rise in sales value, showcasing strong brand performance.
• The West Home brand saw a 29% growth in volume and a 21% increase in total revenue, reflecting successful brand positioning and market engagement.
• Australian Agricultural Co Ltd (AAYYY) is making significant progress in sustainability initiatives, including the Rangelands Carbon by Satellite project and solar upgrades to reduce emissions.

Negative Points

• Operating profit decreased to $20.2 million, down from the prior period, due to global supply and demand dynamics affecting meat prices.
• Wagyu meat sales price per kilogram fell by 17%, reflecting challenging market conditions and price pressures.
• The company experienced a 10% year-on-year decrease in average live cattle prices, underperforming the benchmark.
• Despite increased sales volumes, the operating cash flow remained relatively modest at $4.3 million, indicating ongoing financial pressures.
• The company is not currently considering a share buyback, focusing instead on reinvestment, which may disappoint some shareholders seeking immediate returns.

Q & A Highlights

• Warning! GuruFocus has detected 7 Warning Signs with AAYYY.

Q: Can you provide insights on the current production volumes and whether they represent a new standard for the company? A: (Dave Harris, CEO) While we don't provide specific guidance, the current production volumes are adequate for the business. The increase is due to the development at the GNO property, and these volumes are now normalizing. This is a standard level of production for us with the current supply chain setup.

Q: Why did the live cattle pricing underperform compared to the benchmark in this half? A: (Dave Harris, CEO) The discrepancy is due to a mix of factors. We experienced a good wet season last year, delaying some live sales. The result reflects a mix of different cattle categories sold throughout the year. A full-year view is needed for a more balanced perspective.

Q: How have Wagyu prices been performing since the year-end? A: (Dave Harris, CEO) We've seen a 17% decrease in Wagyu meat sales prices, which is significant. However, compared to market drops of 25-35%, our performance is relatively strong, thanks to our brand value and global distribution network.

Q: What is the company's plan for the obsolete abattoirs south of Katherine, NT? A: (Dave Harris, CEO) We are reviewing strategic alternatives for the Livingstone plant. We see strategic value in it and are maintaining it for potential future operations if conditions improve. A strategic review is ongoing to determine the best course of action.

Q: With a high net tangible asset value versus share price, is a share buyback being considered? A: (Glenn Stedman, CFO) Currently, a share buyback is not being considered. We believe investing funds back into the business is the best way to grow shareholder value and ensure stable returns in the future.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.