Uncertain outlook at AAco
Beef producer Australian Agricultural Company (AAco) has said it is not expecting to make a profit during the first half of the year as a result of low cattle prices, flooding problems and currency fluctuations.
Having said in February that the company expected to return to profitability in 2009 following the severe droughts that plagued the company in 2008, it is now saying that its profit outlook for the year is unpredictable.
"The second half of 2009 is particularly unpredictable as the final, full-year profit outcome will be impacted by currency movements, mark-to-market valuation on the herd and the cattle prices achieved on physical sales,” said the company on June 2. "The sensitivity of profitability to these latter two factors alone is illustrated by the fact that, for every 1% movement in cattle price, EBIT is impacted by $4 million in changing herd value and $1.5 million in physical sales revenue," the company said. "Monthly average cattle prices have been down between 5% and 10% since the start of the year, which will have an estimated negative impact on revenue for the first half of up to $10 million."
