Australian Agricultural Company Limited · ASX:AAC
Australian Agricultural — FY2007 Earnings Presentation
45 slides from Australian Agricultural's earnings presentation, Feb 6, 2008
Slide 1: Results Presentation for the year ended 31 December 2007
Australian Agricultural Company For personal use only Limited Results Presentation for the year ended 31 December 2007
Slide 2: Key operational Highlights
Key operational Highlights •AAco’s system delivered certainty of supply of high quality traceable For personal use only beef to its customers in continued difficult seasons in many areas of Australia •Beef Production increased 7% from 73 million Kg to 78 million Kg •Calving Rate increased from 71% t
Slide 3: 2007 - a challenging year following continued drought from 2006
2007 - a challenging year following continued drought from 2006 Challenge Response For personal use only Drought impacts on southern cattle led Female cattle that were earmarked for sale were held back to forced sales in the south and through the poor selling periods and remain in stock with the ove
Slide 4: AAco Strategy Report Card – 2007 – on ten year plan (year 2)
AAco Strategy Report Card – 2007 – on ten year plan (year 2) Strategy Target Outcome Comment For personal use only Set in 2005 Double the herd in 10 8.6% p.a 5.7% increase to 588k head (last year Average over the last two years increase 11%) years is 8.5%. Drought affected market. Increase Kg of Inc
Slide 5: AAco Cattle Inventory Movements
AAco Cattle Inventory Movements For personal use only Note in 2006 Wrotham park herd was sold and Anthony/Eva herds were acquired and thus passed through sales and purchases respectively. Closure of MIS scheme recognised as profit in other revenue. 5
Slide 6: Profit and Loss details - EBITDA -2007
Profit and Loss details - EBITDA -2007 For personal use only 6
Slide 7: Profit and Loss details 2007 – EBITDA broken down into Normalised Earnings
Profit and Loss details 2007 – EBITDA broken down into For personal use only Normalised Earnings 7
Slide 8: Profit and Loss details 2007 – NPAT -continued
Profit and Loss details 2007 – NPAT -continued For personal use only 8
Slide 9: Domestic Prices in Australia
Domestic Prices in Australia AACo Beef Price Indicator with Benchmarks Monthly : Two years - Jan 06 - Jan 08 For personal use only 410 2006 2007 400 390 230 380 370 360 210 350 340 330 190 c /k g D W 320 In d e x 310 300 290 170 280 270 260 150 250 240 230 220 130 ly ly ril ril y ne y ne h h 6 8 er
Slide 10: Historic retail Beef Prices – Australia domestic
Historic retail Beef Prices – Australia domestic Retail Beef Prices vs CPI For personal use only $18.00 Down in 07 $16.00 $14.00 $12.00 $ per Kg $10.00 Beef CPI $8.00 $6.00 $4.00 $2.00 $- 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 20
Slide 11: USD prices stay stable whilst AUD equivalent fell
USD prices stay stable whilst AUD equivalent fell Volume Weighted Average Export Wagyu Meat Prices - all For personal use only products including trimmings $20.00 AUD Dollars AUD and USD USD • The wholesale meat business was squeezed on margins from two sides, cheap meat from $- oversupply in/ south
Slide 12: Grain prices – last 3 years
For personal use only $ A /t 100 150 200 250 300 350 400 450 500 M ar05 Q tr J un05 Q tr S ep05 Q tr Dec 05 Q tr Wheat M ar06 Q tr Barley J un06 Q tr S ep06 Q tr Sorghum 2006 Dec 06 Q tr Australian Grain Prices ($A/t); Source: ABARE M ar07 Q tr Grain prices – last 3 years Maize J un07 Q tr 2007 S ep
Slide 13: BALANCE SHEET 2007 - Assets
BALANCE SHEET 2007 - Assets For personal use only 13
Slide 14: Rural Property Values continue to rise in Northern Australia
Rural Property Values continue to rise in Northern Australia $'000 Land Revaluations - Average increase is 25% p.a. over last 4 years For personal use only 800,000 45% 700,000 40% 35% 600,000 30% 500,000 25% 400,000 20% 300,000 15% 200,000 10% 100,000 5% - 0% 2004 2005 2006 2007 Land only Pre revalu
Slide 15: Rural Property Values continue to rise in Northern Australia
Rural Property Values continue to rise in Northern Australia Median $/ha land values since 1980 For personal use only 500 450 400 350 300 $/ha 250 200 150 100 50 0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Q
Slide 16: BALANCE SHEET 2007 - Liabilities
BALANCE SHEET 2007 - Liabilities For personal use only 16
Slide 17: BALANCE SHEET 2007 - Equity
BALANCE SHEET 2007 - Equity For personal use only 17
Slide 18: OPERATING CASH FLOW 2007
OPERATING CASH FLOW 2007 For personal use only 18
Slide 19: CASH FLOW FROM INVESTING AND FINANCING ACTIVITIES - 2007
CASH FLOW FROM INVESTING AND FINANCING ACTIVITIES - 2007 For personal use only 19
Slide 20: TSR over years (based on Dec close)
TSR over 5 years (based on Dec 31 close) For personal use only Total Shareholder Return on a $10,000 investment over the last five years $44,000 $42,000 $40,000 AAco $38,000 $36,000 $34,000 $32,000 $30,000 $28,000 $26,000 $24,000 $22,000 $20,000 S&P/ASX 300 $18,000 $16,000 $14,000 $12,000 $10,000 $8
Slide 21: Total Shareholder Return for comparative agricultural entities
Total Shareholder Return (TSR) for comparative agricultural entities For personal use only with 5 years history – before FCL announcement in October 2007 As at 16 August 2007 21
Slide 22: CATTLE PRODUCTION FACTORS 2007
CATTLE PRODUCTION FACTORS 2007 For personal use only Rainfall North South Grass Fertility Grain Genetics Risk Management 22
Slide 23: Months to December 2007 - Significant operational items
12 Months to December 2007 Significant operational items For personal use only • Rainfall over the year was slightly above long term averages. • Prices for store (trade) cattle for most of the year have been significantly affected by forced sales in the south. • Mark to market impact over the 12 mon
Slide 24: Average monthly rainfall pattern
Average monthly rainfall pattern Monthly Rainfall 2007 For personal use only 5,000 4,500 4,000 3,500 3,000 Abnormal rains in June Cumulative Actual 2,500 Cumulative LT Avg 2,000 1,500 1,000 500 - ry ne ry t r ly ch r r ay r ril s be be be be ua Ju gu ua Ap Ju M ar em m o em n Au br M ct e Ja Fe O ov
Slide 25: Actual rainfall pattern 2007 – overall better than average outcome
Actual rainfall pattern 2007 – overall better than average outcome Cumulative Rainfall across all Stations 2007 For personal use only 14,000 12,000 10,000 8,000 Cumulative Actual Cumulative LT Avg 6,000 4,000 2,000 - ry e ry st r ch ly r r ay r ril be be be be n ua Ju gu ua Ap Ju M ar em m o m n Au
Slide 26: Most stations received average and better rainfall
(m m ) An For personal use only th - on 100 200 300 400 500 600 700 800 900 1,000 yL ag oo n Ar Au on st r ui al Do wn Av on s Br Do un wn ett s e Br Do wn LT Avg CYTD ig h to s n Do wn Ca s mf i el d Ca no bi e Ca Actual CY 2007 rru m Cl on ag Da h l go na ly De la m er Ev e a Do wn Gl s en tan a G
Slide 27: FERTILITY
FERTILITY Branding Percentages * For personal use only 75.0% 70.0% 65.0% 60.0% 2002 2003 2004 2005 2006 2007 Branding % . * Branding % = Calves Branded / Breeding Females eligible to have a calf branded during the year. 27
Slide 28: THE BEEF MARKET
For personal use only THE BEEF MARKET World Domestic USA Brazil Japan Korea 28
Slide 29: World Export markets in competing proteins
World Export markets in competing proteins: Beef increasing, pork slight decline, poultry slight increase For personal use only • Beef impacted 2002 by BSE – now recovering • Pork impacted 2007 by Swine flu outbreak in China, Beef now substituting • Poultry impacted by Avian influenza 2006, 2008 exp
Slide 30: WORLD BEEF –EXPORT/IMPORT DYNAMICS– THE MAJOR PLAYERS
WORLD BEEF –EXPORT/IMPORT DYNAMICS– THE MAJOR PLAYERS For personal use only Note: Whilst Australia as a whole is forecast to decline in 2008, AAco is not expecting to decline, rather expects to continue increasing production Source data - USDA 30
Slide 31: Beef: Per Capita Consumption Summary Selected Countries
Beef: Per Capita Consumption Summary Selected Countries Beef Argentina Australia Brazil Canada China, Peoples Republic of European Union 1/ Egypt Hong Kong India 2/ Japan Korea, South Mexico New Zealand Russian Federation South Africa Taiwan Turkey Ukraine United States Uruguay Kilograms Per Person
Slide 32: WORLD IMPORTS BY NATION 2008 forecast
WORLD IMPORTS BY NATION *1000T 2008 forecast '000 Tonnes Beef Imported USA largest importer by far For personal use only United States Russian Federation EU-27 Russian beef consumption remains strong as economic growth driven in Japan part by natural gas and oil revenues surge Mexico Korea Republic
Slide 33: AUSTRALIA 1000 Tonnes of Beef and Veal
AUSTRALIA 1000 Tonnes of Beef and Veal Drought impact of 2007 For personal use only 2,300 2,100 1,900 1,700 1,500 1,300 1,100 900 700 500 f 03 04 05 06 07 08 20 20 20 20 20 20 Produced Consumed Source : USDA 33
Slide 34: USA 1000 Tonnes Produced of Beef and Veal
USA 1000 Tonnes Produced of Beef and Veal US consumption outstrips US production For personal use only 13000 12500 12000 11500 11000 10500 10000 f 03 05 07 04 06 08 20 20 20 20 20 20 Production Consumption Source : USDA 34
Slide 35: CHINA 1000 Tonnes Produced of Beef and Veal
CHINA 1000 Tonnes Produced of Beef and Veal Rising Consumption met by rising internal production For personal use only 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 f 03 04 05 06 07 08 20 20 20 20 20 20 Production Consumption Source : USDA 35
Slide 36: BRAZIL 1000 Tonnes Produced of Beef and Veal
BRAZIL 1000 Tonnes Produced of Beef and Veal For personal use only Whilst consumption is increasing, production is ahead Kg’000 allowing greater export capacity 10000 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 f 03 04 05 06 07 08 20 20 20 20 20 20 Production Consumption Source : USDA 36
Slide 37: 1000 Tonnes Exported
1000 Tonnes Exported USA recovering, AUS flat, Brazil expanding For personal use only 3,000 2,500 2,000 1,500 1,000 500 0 2000 2001 2002 2003 2004 2005 2006 2007 2008f Australia USA Brazil 37 Source : USDA
Slide 38: Australian value of beef still strong
Australian value of beef still strong For personal use only 38
Slide 39: JAPAN 1000 Tonnes of Beef and Veal
JAPAN For personal use only 1000 Tonnes of Beef and Veal Slight 1,600 increase 1,400 1,200 1,000 800 600 400 200 0 f 00 01 02 03 04 05 06 07 08 20 20 20 20 20 20 20 20 20 Japan Consumption Imports 39 Source : USDA
Slide 40: KOREA 1000 Tonnes Imported of Beef and Veal
KOREA For personal use only 1000 Tonnes Imported of Beef and Veal 450 400 Recovering 350 300 250 200 150 100 50 0 2002 2003 2004 2005 2006 2007 2008f Korea (Sth) imports 1000T Source : USDA 40
Slide 41: THE FUTURE
For personal use only THE FUTURE Outlook for 2008 Outlook for 2015 41
Slide 42: Outlook for 2008
Outlook for 2008 Market Outlook For personal use only Factors influencing the market in Australia as assessed by AACo are: • Cattle prices are expected to lift with a return to more normal seasons in the South as graziers re-stock. • As fuel prices are likely to stay at current high levels, the comp
Slide 43: Outlook for 2008 continued
Outlook for 2008 continued • The world supply of quality beef remains limited by historically low For personal use only herd numbers in the USA and Australia and herd health issues in South America, although current USDA forecasts 1.4% growth this year. • The protocols restricting access of US beef
Slide 44: Outlook for 2015
Outlook for 2015 The long term strategic plan enunciated in 2005 continues to embrace For personal use only the following targets for the core business: 1. To more than double the herd size 2. To Triple the production of feed crops 3. To improve land carrying capacities by up to 20% on selected prop
Slide 45: Looking to the future - business development opportunities under consideration
Looking to the future - business development opportunities under consideration For personal use only 1. Increasing participation in the portion control section of the beef supply chain – our new facility has space to triple its current capacity. This will be driven by internal development, however s
Australian Agricultural Company — FY2007 Earnings Presentation on 6ix