Australian Agricultural Company Limited · ASX:AAC
Australian Agricultural — 3 months to 31 March 2013 Earnings Presentation
26 slides from Australian Agricultural's earnings presentation, May 24, 2013
Slide 1: Financial Results for the 3 month period to 31 March 2013
For personal use only AUSTRALIAN AGRICULTURAL COMPANY LIMITED Financial Results for the 3 month period to 31 March 2013 24 May 2013
Slide 2: Disclaimer
Disclaimer For personal use only Important information Summary information only This presentation contains general information about the Australian Agricultural Company Limited and its consolidated entities (“AACo”) and its activities current as at the date of this presentation. It is provided in su
Slide 3: Overview
Overview For personal use only AACo has shifted its year-end to 31 March to more closely align the Company’s reporting period with its sales cycles, assisting with forecasting, cash flow management and investment decisions These results are for the three month period to 31 March 2013 Due to the wet
Slide 4: Summary financial results for months to March 2013
Summary financial results for 3 months to 31 March 2013 For personal use only Sales $61.1mil increase of $17.8mil compared to the pcp1 EBITDA2 $(64.6)mil decrease of $(63.4)mil compared to the pcp EBITDA $(21.4)mil decrease of $(26.2)mil compared to the pcp (excl. Market Value Changes3) NPAT $(46.5)
Slide 5: Summary financial performance
Summary financial performance For personal use only 3 months to 3 months to Change $m 31 Mar 2013 31 Mar 2012 ($m) Sales 61.1 43.3 17.8 Cattle gross margin1 (42.5) 16.4 (58.9) Wholesale Beef gross margin 0.6 0.8 (0.2) Farming gross margin 1.5 (0.9) 2.4 Gross operating margin (40.4) 16.3 (56.7) EBITD
Slide 6: Reconciliation of EBITDA to Operating Cash Flow
EBITDA has been significantly adversely affected by a number of non- cash livestock valuation movements, while Operating Cash Flow is For personal use only approximately in line with the pcp Reconciliation of EBITDA to Operating Cash Flow 0.00 (10.00) 1.40 0.23 0.24 59.43 (20.00) 0.72 (18.60) (30.00
Slide 7: Underlying 'Cash' EBITDA is approximately in line with the pcp
Underlying ‘Cash’ EBITDA is approximately in line with the pcp For personal use only 3 months to 3 months to Change ($mil) 31 Mar 2013 31 Mar 2012 ($m) Statutory EBITDA1 (64,550) (1,153) (63,397) Add back: non-cash Market Value Changes to Livestock2 43,179 6,002 EBITDA ex. Market Value Changes (21,3
Slide 8: Herd value is affected by a number of non-cash items
Herd value is affected by a number of non-cash items For personal use only Opening Effect of Closing Purchases Births Deaths KG Grown Sales Herd Price ∆ Herd DR CR DR CR DR CR DR CR DR CR DR CR Inventory Cash Inventory Fair Value Fair Value Inventory Inventory Cattle Inventory Fair Value Cash Cattle
Slide 9: Breeder Herd decline due to market price revaluation
Included in the Breeder Herd at 31 March 2013 is a $35.3m decline due to market price revaluation1 For personal use only Herd Valuations ($mil) $350.0 $308.2 $300.0 $245.7 $250.0 $200.0 $ mil 31/12/2012 31/03/2013 $150.0 $100.0 $67.5 $68.1 $69.9 $61.5 $50.0 $33.4 $35.4 $24.6 $19.4 $- EasternTrading
Slide 10: Herd value sensitivity
Herd value sensitivity For personal use only Eastern Trading Northern Trading Feedlot Breeding Herd Herd Herd Head @ 31 March 2013 ('000) 115 82 39 316 Average Weight @ 31 March 2013 344 LW kg 313 LW kg 522 LW kg Average Book Value @ 31 March 2013 $1.54 / LW Kg $1.37 / LW Kg $3.42 / LW Kg $778 / hea
Slide 11: Cattle update
Cattle update For personal use only Trading herd - both weight gained and total size of herd is down compared to the pcp due to the drier conditions Breeding herd - dry conditions during the three month period to 31 March 2013 have resulted in an earlier start to mustering compared to previous years
Slide 12: Poor rainfall adversely affecting result
Poor rainfall adversely affecting result For personal use only Wet Season (October – March) Cumulative Rainfall Probabilities by Region 100% 90% 80% Cumulative Probability of Less than X mm of rainfall Barkly 2013 70% Central and Southern QLD 2013 Channel 2013 60% Gulf 2013 Victoria River 2013 50% A
Slide 13: Domestic cattle prices continue to be depressed
Domestic cattle prices continue to be depressed For personal use only Eastern Young Cattle Indicator (EYCI) 450 250 Thousands 400 200 350 150 300 Sum of Head - 2011 Ac/kg cwt Sum of Head - 2012 Sum of Head - 2013 250 EYCI - 2011 100 EYCI - 2012 EYCI - 2013 200 50 150 100 0 2 3 4 5 6 7 8 9 10 11 12 1
Slide 14: What's depressing domestic cattle prices?
What’s depressing domestic cattle prices? For personal use only Australian cattle herd at record levels Poor Wet Season million head 35 30 25 20 15 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12e13f 14f 15f 16f 17f As at 30 June, as at 31 March up until 1999 Source: f = f orecasts Source: Bur
Slide 15: Free Trade Agreements with Korea and Japan costing market share
The Australian Federal Government’s inability to secure satisfactory Free Trade Agreements (FTA) with both Korea and Japan is costing For personal use only industry market share Satisfactory and competitive FTA’s are crucial for Australian cattle beef producers to enable access to the higher global
Slide 16: Changes in the herd composition
Changes in the herd composition For personal use only 800.0 681.7 676.2 700.0 96.3 123.7 600.0 500.0 Unbranded Calves ‘000 head Breeding 400.0 355.9 315.7 Feedlot Northern Trading 300.0 EasternTrading 40.3 38.8 200.0 63.2 82.4 100.0 126.1 115.7 - 31/12/2012 31/03/2013 Australian Agricultural Company
Slide 17: Cattle sales
The 3 months to 31 March 2013 has seen a significant lift in Grass Finished as well as Breeder and Feeder cattle sales at substantially lower prices compared For personal use only to the pcp due to the impact of drier conditions Cattle sales (head) 45,000 40,000 8,593 35,000 30,000 11,968 25,000 Hea
Slide 18: Overall herd size remains reasonably static
Overall herd size remains reasonably static over the 3 months to 31 March 2013 with cattle sales being largely offset by the accrual for For personal use only unbranded calves 800 700 682 124 676 7 600 585 6 (96) 553 (41) (4) 500 ‘000 head 400 300 200 100 0 Opening Total Opening Calf Opening Purchas
Slide 19: Wholesale Beef Group update
Wholesale Beef Group update For personal use only Increased sales volume of 65% compared to the pcp Increased average sales price for both Wagyu ($11.16 vs $10.17) and 1824 ($6.97 vs $6.20) compared to the pcp Large, one-off line of 1824 (100-day) cattle processed in January reflected in higher Aust
Slide 20: Property sale update
Property sale update For personal use only On 20 May 2013, AACo announced that contracts had been exchanged for the sale of subdivisions of its Goonoo Aggregation for $23 million The properties consisted of 3 dry land farming and grazing properties totalling 19,404 hectares Under the sale agreement,
Slide 21: Outlook
Outlook For personal use only Domestic cattle markets and prices remain volatile with current prices approximately in line with 10 years ago, despite significant cost increases over this same time period Global beef prices remain generally higher, less volatile and are rising over time compared to d
Slide 22: Domestic cattle markets volatile while global beef prices appreciate
Domestic cattle markets remain volatile while global beef markets are seeing price appreciation For personal use only A$1.90/ kg cwt difference between domestic peak and trough prices Domestic cattle prices roughly where they were 10 years ago, while costs over the same period have increased signifi
Slide 23: The macro thematic will continue to underpin global beef price
The macro thematic will continue to underpin the global beef price only Global cattle herd remains stagnant US Cow Herd continues to decrease United States 1,000,000 Others Canada personal use 800,000 Mexico Supply Russia ‘000 Head 600,000 Australia Colombia 400,000 Argentina EU-27 200,000 China Bra
Slide 24: Vertical integration strategy pivotal to exposure to global beef prices
AACo’s vertical integration strategy is pivotal to increasing exposure to global beef prices For personal use only AACo will capture increased margins previously not able to be captured Minimising volatility through vertical integration Transport and production cost savings Australian Agricultural C
Slide 25: Channel and brand marketing strategies to increase Return on Capital Employed
Developing and investing in appropriate channel and brand marketing strategies is key to increasing AACo’s Return on Capital Employed For personal use only AACo sells high quality beef to more than 30 countries AACo is focussed on investing in appropriate channel and brand marketing strategies to in
Slide 26: Summary
Summary For personal use only Financial results for the 3 months to 31 March 2013 have been adversely impacted by a very poor wet season and resultant drier conditions, combined with the ongoing negative effects of the live export suspension by the Australian Government in June 2011 Majority of the
Australian Agricultural Company — 3 months to 31 March 2013 Earnings Presentation on 6ix