Has the Australian Agricultural Company Ltd (ASX:AAC) share price bottomed?

The Australian Agricultural Company Ltd (ASX:AAC) released another disappointing result. Here's what you need to know.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares in beef producer Australian Agricultural Company Ltd (ASX: AAC) – also known as AACo – were 4% up to $1.18 on Wednesday, following the release of its FY18 results.

The company issued a preliminary report in April, flagging non-cash charges of around $60 million in relation to its Livingstone Beef processing facility, and a statutory EBITDA loss estimated between $30 million and $40 million.

Consistent with forecasts, the company reported operating EBITDA of $14 million, statutory EBITDA loss of $35 million, and a statutory net loss of $103 million, compared to a profit of $72 million in FY17.

The real surprise is Livingston Beef. The plant weighed on the budget with a $22 million operating loss, and to avoid further damage the company resolved to suspend processing operations as soon as compatible with employee and customer commitments. This will result in a larger-than-expected one-off write-down of $75 million.

AACo declared the facility will be maintained at a level that enables an efficient plant restart should market conditions improve.

Results from the premium segment (AACo's mid-range branded beef) were also disappointing, with revenue down 34% to $64 million. The company will most likely refocus its business on the luxury/prestige brand segment, the only one that saw revenue grow by 1% to $177 million.

CEO Hugh Killen said conditions in the first half of FY19 remain challenging, and management is focused on continued financial discipline and driving internal cost efficiencies through efficient feed use and cattle movements.

The company maintains its balance sheet is robust, with comfortable headroom remaining within existing bank facilities. Net debt amounts to $348 million, with gearing at 26%.

Foolish takeaway

With the stock trading 40% below its price this time last year, some may be tempted to bet that AACo has bottomed out.

However, I'm afraid the company is still far from making a turnaround. Even the decision of shutting Livingston while continuing to pay for its maintenance is not very promising in terms of a decisive reshaping of the business.

Motley Fool contributor Tommaso Autorino has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »