Australian Agricultural Company Limited · ASX:AAC
Australian Agricultural — H1 2008 Earnings Presentation
30 slides from Australian Agricultural's earnings presentation, Aug 12, 2008
Slide 1: Results Presentation for Half Year ended 30 June 2008
For personal use only Australian Agricultural Company Limited Results Presentation for Half Year ended 30 June 2008 1 Stephen Toms – CEO 12 August 2008
Slide 2: Result in Summary
Result in Summary For personal use only – Positive Operating Cash Flow of $5.9 million (‐$20m pcp) – NTA improvement to $2.79 per share – Operating EBIT $16 million ($21.3 million pcp) – Up 28% after adjusting for AMP settlement of $8.8 m in 2007 – Wholesale beef segment profit $1.5m (loss $0.3m pcp
Slide 3: Agenda
Agenda For personal use only – Operational Update – Financial Analysis – Review of Business by Segment – Cattle and Farming – Branded Beef – Seasonal Conditions – Market Conditions and Outlook – Board and Management – Priorities for 2008 – Summary 3
Slide 4: Key Operational Drivers
Key Operational Drivers For personal use only – Sale of 121,559 Head of cattle releasing $76.7m in cash – Rainfall patterns returned to normal – Barkly Region the exception – Management capacity to deal with logistics of significant cattle movement to mitigate herd risk. – Property values continue t
Slide 5: Financial Analysis: Profit and Loss
Financial Analysis For personal use only Profit and Loss $M Jun 08 Jun 07 %Ch 1 Includes $10m settlement Total Operating from AMP 123.6 124.2 1 ‐0.5 Revenue Operating costs rose due to higher cropping activity, Operating Costs 101.7 98.5 +3.2 agistment, fuel and grain costs. EBITDA 21.8 26.3 ‐17.1 2
Slide 6: Financial Analysis: Cash Flow
Financial Analysis For personal use only Cash Flow Jun 08 Jun 07 %Ch Retained cattle in 2007 – now sold Operating Cash flow $m 5.9 (20.0) n/a 2007 included payout of Goonoo lease $16m Capex ($m) 3.6 23.5 ‐85 Sold 2007 overflow + young cattle due to dry conditions Cattle Sold (head) 121,559 65,587 +8
Slide 7: Balance Sheet – Key Assets
Financial Analysis For personal use only Balance Sheet – Key Assets Jun 08 Dec 07 %Ch Livestock benefited slightly from mark to market uplift Total Livestock ($m) 431.6 426.5 +1.2 of net $9m A portion of the portfolio was revalued upward by Property & Equip ($m) 829.2 810.4 +2.3 $21m, based on recen
Slide 8: Balance Sheet – Key Liabilities
Financial Analysis For personal use only Balance Sheet – Key Liabilities Jun 08 Dec 07 %Ch Nil short term net debt position Total Net Debt ($m) 407.7 410.7 ‐0.7 Net Debt/(Net Debt + Equity) Gearing (%) 35.9 36.1 Main increase arose from Deferred income tax proposed retrospective liabilities ($m) 151
Slide 9: Financial Analysis: Dividends
Financial Analysis For personal use only – The 2008 dividend of 7 cps is consistent with prior years and remains un‐franked – DRP remains in place and will be underwritten Dividend Cents per Franked Ex- Dividend Payable Date Status Type Share % Date Final 7 0 TBA Sep 08 TBA Oct 08 Declared Final 7 0
Slide 10: Financials by Segment
Financials by Segment For personal use only Analysis of Profit and Loss by Segment $’000 $’000 COMMENT Half Year ended 30 June 2008 2007 Cattle and Crop Revenue 76,497 64,284 19% increase due mainly to Mark to market valuation and crop revenues 14% increase related to increased crop activity as well
Slide 11: Branded Beef: Wholesale Beef Sales by Month
Branded Beef For personal use only WWholesale holsesale Beef Sales by Month $5,500,000 Meatworks $5,000,000 breakdown in June $4,500,000 pushed sales out $4,000,000 into $3,500,000 July/Aug $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 -0 6 - 06 06 7 -0 b-0 7 -0 7 -0 7 07 07 07 07 07 t -07
Slide 12: Branded Beef Operating Highlights
Branded Beef For personal use only Operating Highlights – Wagyu Sales continue to climb – First half revenue and earnings were delayed in June due to contractor plant breakdown – Costs associated with the breakdown have been recovered – The restaurant / food service trade has flattened off in Austra
Slide 13: Cattle and Farming Operating Highlights
Cattle and Farming For personal use only Operating Highlights – a mix of seasons across our portfolio ‐ Excellent seasonal conditions in southern Qld and northern NSW ‐ substantial number of cattle relocated from the drier Barkly Tableland properties ‐ restocking in the south saw highly sought after
Slide 14: Cattle and Farming Operating Highlights (continued)
Cattle and Farming For personal use only Operating Highlights (continued) – A good season in the lower Gulf breeding and growing stations − 30,000 Barkly breeders transferred this year, facilitating the re‐ stocking of the Barkly in 2008/9 – A poor season on the Barkly tableland − cattle transferred
Slide 15: Seasonal Conditions: Rainfall by Property
For personal use only (mm) - 100 200 300 400 500 600 700 Anthony Lagoon Aronui Austral Downs L T A vg C Y TD Avon Downs Brunette Downs Brighton Downs Camfield Canobie A c t u a l C Y TD 2 0 0 8 Carrum Clonagh Dalgonally Delamere Eva Downs Glentana Goonoo Seasonal Conditions Gregory Downs properties
Slide 16: Seasonal Conditions: Monthly Rainfall
Seasonal Conditions For personal use only Return to more normal rainfall patterns – March to May actuals impacted by drought conditions in the Barkly Monthly Rainfall across all stations (mm) 2008 3,500 3,000 2,500 2,000 1,500 1,000 500 - Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-0
Slide 17: Seasonal Conditions: Dry Conditions on the Barkly Tableland
Seasonal Conditions For personal use only Dry conditions on the Barkly Tableland Exhibit 1: AAco’s Land Portfolio Darwin Delamere Mont eiinni Cairns Ant hony Lagoon Gregor y Downs Camfield Lawn Eva Downs Hill Gregor y Far m Br unet t e Wondoola Rockhampt on Canobie Townsville Downs Downs Kalmet a Te
Slide 18: Cattle Prices – Long term trend
For personal use only Cents / Kg DW 100 150 200 250 300 350 400 450 1996 - 08 1997 - 01 1997 - 06 1997 - 11 1998 - 04 1998 - 09 1999 - 02 1999 - 07 1999 - 12 2000 - 05 2000 - 10 2001 - 03 2001 - 08 2002 - 01 2002 - 06 2002 - 11 2003 - 04 2003 - 09 2004 - 02 Cattle Prices – historical chart 2004 - 07
Slide 19: Cattle Prices - 2008
Cattle Prices ‐ 2008 For personal use only Strong recovery in prices since June Average Monthly EYCI - Last 8 months 360 A 7% rise in six weeks 350 340 Cents/Kg DW 330 Series1 320 310 June 300 Balance Date 290 2008 - 01 2008 - 02 2008 - 03 2008 - 04 2008 - 05 2008 - 06 2008 - 07 2008 - 08 A 7% mark
Slide 20: Cattle Prices – Queensland Market
Cattle Prices – Queensland Market For personal use only Recovery particularly pronounced in Queensland Q ld C a ttle M a rk e t In d e x - la s t 1 8 m o n th s 190.0 185.0 180.0 175.0 170.0 165.0 160.0 155.0 r 7 07 ry ry r y 07 08 er 08 ch be ch t il il ly be r0 ay ay ar us pr pr ua ua Ju ob ar ar
Slide 21: Market Conditions: Rural property values continue to rise
Market Conditions For personal use only Rural property values continue to rise in the North Compound Growth by Region 60.0% 50.7% 50.0% 40.0% 30.0% 21.2% 20.7% 21.2% 19.5% 17.6% 20.0% 13.0% 12.1% 15.0% 11.1% 10.0% 0.0% Queensland Northern Qld Central Qld Southern Qld Northern Territory Compound Grow
Slide 22: Market Outlook for 2008 - Australia
Market Outlook for 2008 ‐ Australia For personal use only – Higher cattle prices anticipated as evidenced in recent weeks – Fuel prices expected to stay at current high levels – An energy efficiency study commenced to examine reduction of diesel use though better electricity management, solar, and b
Slide 23: Market Outlook for 2008 - Global
Market Outlook for 2008 ‐ Global For personal use only – World supply of quality beef remains constrained as demand rises and global herd size declines – Herd health issues in South America impacting the supply of quality beef – US herd and calf production are forecast to decline in 2008. – Further
Slide 24: Market Outlook for 2008 - Global
Market Outlook for 2008 ‐ Global For personal use only – Attention to cost and price dynamics – Significant changes in farm input costs around the world and rising rural land values will generate upward pressure on beef prices – World demand for clean, exportable beef remains strong – Consumers incr
Slide 25: Market Outlook for 2008 - Global: Brazil and USA
Market Outlook for 2008 ‐ Global For personal use only Snap shot of international beef dynamics by country – Brazil – Herd health issues ‐ some restrictions in entering the EU have resulted in flat export forecasts – Strong currency, increasing inflation and rising costs and interest rates are makin
Slide 26: Market Outlook for 2008 - Global: Russia, China, Other
Market Outlook for 2008 ‐ Global For personal use only Snap shot of international beef dynamics (contin) – Russia – Economic growth and prosperity ‐ consumption forecast to grow 2.9% – Imports from Australia increasing – Russian herd to decline by 3.3% – China – Increasing prosperity – Consumption f
Slide 27: Board and Management
Board and Management For personal use only Board CEO Expansion of the existing 4 Stephen Toms member board is under review. Company Sec/ Gen Counsel Bruce Bennett CEO position now confirmed QA, Internal Audit CFO position to be filled. Toni Casey GM GM GM GM Business Breeding Livestock Corporate Dev
Slide 28: Strategic Position
Strategic Position For personal use only 10 Year plan set in 2005 – Focus on cattle/beef production and associated cropping – Doubling of the herd to exceed 1million head – Three equity injections over 10 years of $100m each – Property development programme to increase the herd by 20% on the same la
Slide 29: Strategic Priorities for 2008
Strategic Priorities for 2008 For personal use only – Ensure continued positive cash flow delivery for 2008 – Re ‐ balance the breeding herd for 2009 – Ensure herd is managed to take advantage of anticipated rising prices – Fine tune property portfolio – Reduce climate impact on operational earnings
Slide 30: Summary Position
Summary Position For personal use only – Board and management are aligned – The Company has a sound financial base enabling it to pursue its objectives – AACo has enjoys strong stakeholder support from Shareholders, Lenders, Staff and the Community – Total shareholder returns are exceeding benchmark
Australian Agricultural Company — H1 2008 Earnings Presentation on 6ix