Australian Agricultural Company Limited (AAC)

By Jason Fittler

AAC is Australia´s largest cattle manager, with more than 600,000 head of cattle and a land bank of more than 6m ha from around 20 properties.  

Vertical integration from breeding to exporting with high-rainfall stations minimises, but does not remove, drought risk.  

A key advantage is quality control, gaining premium pricing for its source-guaranteed and marbled beef.  

With a long history, the company has considerable experience in beef cattle production. 

Earnings and cash flow are volatile.  

AAC´s extensive land and cattle holdings are valuable assets and provide investors with direct exposure to cattle and land-price movements, but dividends are likely to be minimal. 

Full year 2011 earnings before interest and tax were up 41% on 2010, with a net profit of $11.8 million for the 2011 year which was a turnaround from the loss of $2.1 million in 2010. 

Sales increased on the back of herd improvements and very good seasonal conditions. They are continuing to expect demand to increase in Asia, continued good weather in the next two years and have forecast that they will start paying dividends in 2013 financial year.   

The company is trading at a 20% discount to net assets and an 18% discount to our fair value. 

This company provides good exposure to the beef industry but you must be prepared to ride out the bad seasons. 

For more information on Australian Agricultural Company Limited (AAC) please contact us on 07 4771 4577.