Australian Agricultural Company to shut Livingstone Beef meatworks in A$80m write-down

Australian Agricultural Company is to shut its loss-making Livingstone Beef meatworks facility as part of a strategic review into the business’s operations.

Announcing its full-year results today, AACo revealed the outcome of a review into Livingstone Beef launched on April 4. The review determined the facility should close “as soon as practical” in an attempt to stop operational losses being incurred there and “appropriately consider other credible alternatives that may support shareholder value realization from the asset in a measured manner.”

The facility made an operating EBITDA loss of A$22.4 million ($17.8 million; €14.7 million) in FY 2018, but AACo maintained that it could be profitable with “significant strategic value” in the right market with the right operating conditions.

The move will result in a total one-off write-down of A$74.9 million, including a non-cash impairment of A$69.5 million with respect to buildings, improvements, plant and equipment, and an additional A$5.4 million provision recorded for an onerous contract in relation to the facility.

AACo’s posted a statutory EBITDA loss of A$35.3 million for FY 2018 compared with profits of A$133.2 million a year earlier, while operating EBITDA dropped to A$13.6 million from A$45.0 million in 2017.

The firm said earnings had been affected by increased competition in parts of its product portfolio, reduced volumes due to less reliance on external supply, and increased input costs caused by dry weather conditions.

The figures were in line with a market update AACo issued in June announcing the strategic review.

‘Simpler, profit-focused’

AACo’s portfolio comprises 19 owned cattle stations, two leased stations, seven agisted properties, two owned feedlots, the Livingstone Beef processing facility and two owned farms located throughout Queensland and the Northern Territory. The value of the company’s property portfolio is A$698 million, an increase of A$26.3 million in FY 2018, according to its latest financial report.

The company’s largest shareholder is the AA Trust, a vehicle ultimately owned by Joe Lewis, the British founder of private equity firm Tavistock Group, which holds just over 42 percent of the company’s shares.

“Fundamentally, AACo is a strong, branded business with an established presence in high-potential, high-value markets, supported by a portfolio of world-class assets. However, recent financial performance has been weak due to a range of factors,” said Hugh Killen, the company’s chief executive, in a statement to the Australian Stock Exchange.

“We need to create a simpler, more productive and more profit-focused AACo to deliver on the company’s potential. Significant change is required to improve profitability and cashflow generation across the supply chain, and we have taken decisive action to deliver sustainable, long-term shareholder returns.”