INTERVIEW - Australia Cattle King Sees Drought End, More Growth
Date: 07-Feb-07
Country: AUSTRALIA
Author: Michael Byrnes
A A$17.3 million write-down in the value of the company's cattle herd drove a 40 percent downturn in 2006 net profit, but Chief Executive Don Mackay said the result masked "strong growth in operations".
Cattle price rises so far this year have increased the value of the company by A$14-A$15 million (US$11-US12 million), returning it more or less to where it was before the write-down.
"We've started the season very well. All the indicators on cattle prices and demand look good. I don't see any reason why we wouldn't have a good, sound year this coming year," Mackay said in an interview.
Shares in AACo, valued at around US$406 million, have risen more than a fifth so far this year, far outpacing the broader share index's 3.5 percent gain.
Annual revenue is forecast to rise to above A$280 million in 2007, according to Reuters Estimates.
AACo, one of Australia's oldest companies, weathered the drought well in 2006, in Mackay's view, protected by its sheer size.
It helps when you have 8.2 million hectares (20.26 million acres) in 22 properties -- 1.1 percent of all of Australia, as big as Ireland and more than 12 percent the size of Texas.
AACo used fleets of three-trailer truck road trains, as well as railways and horseback drovers, to move cattle in its 561,000-head herd from property to property to chase pasture feed last year during a continuation of Australia's worst drought in a century.
Small farms have nowhere to go if hit by drought. AACo has properties strung across remote, unpopulated northern Australia, with 60 percent of the company's cattle in Queensland state and 40 percent in the Northern Territory.
Only its most southern Queensland properties, near Roma and in the Channel Country, were seriously hit by drought in the past year.
DROUGHT TO EASE?
Asked whether Australia could go on running big cattle enterprises in the face of the long-running drought, Mackay was emphatic.
"Oh yeah! Absolutely.
"We're never completely devoid of drought. But because of the scale of the organisation ... when you manage in that environment, it works," Mackay said.
Queensland's Channel Country is now in flood after receiving recent deluges of good rain, he said, rejecting the more extreme warnings of climate change.
Even so, AACo, like everybody on the land, eagerly awaits an end to the crippling drought. Mackay says it is already breaking down.
"I think the chances of it staying dry everywhere are probably highly unlikely," he said. "Northern Australia is enjoying a very good start to the year. The general consensus is that El Nino is breaking down."
AACo is not aiming for substantial growth in cattle numbers this year, but still aims to double the size of its herd and landholdings over the next 10 years.
"We've kept that pace up quite comfortably. Some people think you've got to have a big bang approach to that," Mackay said.
But production could be significantly increased from the company's existing land-base, and Mackay said there was scope for a lot more growth to come.
He also said Australia would continue to have a strong run of exports to Japan and North Korea, with the United States lacking the export mentality to quickly re-build in those markets after years of exclusion because of mad cow disease.
(US$1=A$1.29)
