The Australian Agricultural Company Ltd (ASX: AAC) share price has jumped more than 3% higher following a solid half-year report.
Shares of the beef and cattle company rose on the back of an ASX announcement which showed a 467% rise in net profit, to $49.8 million, for the period ended 30 September 2015. The result was driven by an 88% increase in meat sales and 29% jump in cattle sales.
Meanwhile, administration costs fell 34%, and the carrying value of all livestock on its balance sheet rose from $265 million to $295 million.
"Our traditional pastoral business has performed as you would expect in a rising cattle market but I'm really pleased with the performance of the group as a whole," AACo Managing Director, Jason Strong, said. "We have a lot more to do, plenty of challenges to meet in the second half and we are now firmly focused on delivering our branding and innovation programs as we move to the next stage of the transformation phase."
Mr. Strong's goal for the company is to become an internationally trusted producer of the finest Australian beef — so far so good.
"Our Wagyu brands have won numerous national and international awards in the past six months and there is growing demand for the quality beef we produce," Mr. Strong said. "Sales of boxed beef increased by $103 million half-on-half and now account for almost 85 per cent of total revenue. These sales are predominantly to the same customers, who are buying more beef."
Buy, Hold or Sell?
AACo is trying to tread down a similar path to the likes of Bellamy's Australia Ltd (ASX: BAL) and Blackmores Limited (ASX: BKL) and push quality brands into booming Asian markets.
It makes perfect sense from a long-term perspective too, since the world's consumption of beef is expected to jump 120% over the next 50 years, and land suitable for agriculture is shrinking. While the potential is massive; the risks are equally large. And AACo is exposed to many risks that are outside its control (weather, disease, regulation, etc.).
Nonetheless, I think if you have an ultra-long-term view, considering buying a small parcel of AACo in the dips mightn't be such a bad idea.
