Australian Agricultural Company Limited

Thank you for standing by and welcome to the Australian Agricultural Company Limited FY26 four-year results release. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you would like to ask a question by the phones, you'll need to press the star key followed by the number one on your telephone keypad. If you would like to ask a question by the webcast, please enter it into the ask a question box and click submit. I'd now like to hand the conference over to Mr. David Harris, MD and CEO. Please go ahead.

Good morning and welcome to the Australian Agricultural Company's year-end presentation for 2026. My name is Dave Harris and I am the Managing Director and CEO of AECO. And joining me on the call today is our Chief Financial Officer, Glenn Steadman. Before we begin, I want to recognise that AECO properties are the traditional homes of many First Nations people. We acknowledge them and offer our respect to their elders past and present. We recognise their culture and honour their deep connection to the land, waters, animals and skies, especially across the places we have lived and worked for over 200 years. As a food and agricultural company, there is much to learn from their approach to community and their knowledge and care for country. Our presentation today will follow the regular format. I'll start with an overview of 8ACO, including our FY26 highlights and the commercial updates. Then I'll hand over to Glen to run through the financial performance in more detail, before closing with an update on current market conditions. And with that, let's begin on slide 5. 8ACO is a branded beef business, focused on the production sale and marketing of high-quality value to customers around the world. Our integrated value chain connects land, livestock, brands and customers in a controlled system, allowing us to respond to and build market demand. Our approach combines scientific innovation, modern production practices and a strong commitment to animal welfare and environmental stewardship. Our value chain is managed by a workforce of around 450 people across the properties, our Brisbane office and in key markets all around the globe. As custodians of 1% of Australia's landmass and operators of one of the largest cattle production systems, we understand our success is underpinned by working with nature. We take a nature-led approach by utilising farming practices that aim to balance the needs of cattle, humans and the ecosystems in our care. We have an extraordinary legacy that we're excited to build on as we enter a new chapter of expansion under our strategic focus areas, which I'll share more on as we turn to slide six. At AACO, our purpose is to reimagine Australian agriculture to share with the world. It continues to guide us as we make progress towards our strategy, which underpins how we build future growth and create long-term value for shareholders. That plan is centred on three key focus areas. Better beef, unlocking the value of the land, and partner and invest. Better beef focuses on creating beef that commands premium prices, demand and trust, increasing high-quality supply and supporting sustained increases in revenue, margin and brand equity. Unlocking the value of the land enables us to develop diverse and more sustainable use cases for our properties, opening additional revenue streams and improving environmental outcomes. Under Partner and Invest, we're advancing agricultural innovation and knowledge through collaboration. helping to strengthen our operations and contribute to progress across the industry. Executing on these strategic pathways will enable us to deliver our long-term vision of being the leading food and agricultural company delivering nature-led solutions at scale. Just as importantly, how we deliver on the strategy matters. Our values at AACO are be curious, be generous, and own your impact, help shape the culture we need to bring these ambitions to life and to bring out the best in our people and our business. As we progress on the execution of our strategy, we remain focused on growing value, profitability and improving cash generation to enhance workability in the medium to long term. As we turn to slide seven, I want to share how proud I am to lead AACo in what was a record year with significant challenges. We're focused on executing our strategy to deliver sustained growth. How we manage our assets now and into the future matters even more as we continue to navigate increasingly uncertain market and environmental conditions. Through our operational activity, we're working to enhance land condition and business resilience over time, whilst generating improved financial returns. We saw the value of that resilience during the year when our Gulf of Carpentaria properties faced another extremely unfortunate flooding event, which sadly caused losses. As previously disclosed to the ASX, we estimate 7,000 head of cattle were lost in this event. Past investments in our sustainable stocking model, Flood Refuge Bank, infrastructure improvements and flood management plans meant that we were better prepared. Our animals, land and infrastructure came through in much better condition than they did after the 2019 flood in the STEM region. And, as you'll see shortly, FY26 operating profit is our strongest yet, even after the financial impact of that flood. It's an outcome that speaks to the resilience and capability of our team. and reflects how our people respond to challenges. Taking care in what they do and working together as one, I echo, to deliver such a strong result. That experience, knowledge and drive represent our values in action and underpin the momentum we're seeing as we execute our strategy, which I'll turn to now on slide eight. This year we achieved our highest operating profit while making progress towards our strategic focus areas to position our supply chain for future growth. Our total revenue for FY26 is $422.1 million, an increase of 9% versus the prior year. This improvement was driven by higher prices and strong execution across both beef and cattle sales, allowing us to capture opportunities throughout the year. Particularly notable given volumes remain steady. Our global approach to brands and continued investment in relationships and distribution has helped translate that into stronger beef sales. Our operating profit of $71.6 million is our strongest four-year result since the measure was introduced in 2019 and remains the clearest view of earnings generated by the business because it excludes items outside management's control, such as herd valuations. This record result was driven by our sales execution and disciplined cost management, with margin improvement outpacing revenue growth. It's an example of how we're better utilising our assets to generate returns, and how our teams continue to build efficiencies into the business that add to our bottom line. Our positive core free cash flow shows the underlying cash generation of the business, excluding in-year strategic investments. This improved $11.4 million on the prior period, demonstrating that the progress we've made to date is starting to pay off. That progress is also reflected in our net tangible asset position, which strengthened over the year. Given the nature of our supply chain, much of the capital we deploy is intended to support steady long-term growth that comes through over time. That's certainly the case for the work progressed under Betterbees this year. which is focused on improving supply, quality and consistency of our branded beef. Our genetics program is accelerating herd improvement and bringing forward commercial benefits in a material way. This is being driven by what we believe to be the largest embryo transfer program for cattle carried out in Australia over the past year, by improving genetic testing, and buy live animal assessments to optimise feeding pathways. Over time, this will increase the number of animals that are better suited to AACO's premium brands and high-paying markets. To support that growth in supply, we have also invested in finishing capacity to improve scalability. At Ganoony Emerald in central Queensland, we've added an additional 10% production capacity. supporting the consistent year-round supply that underpins AACO's branded Wagyu beef sales. Another priority under the Better Beef Focus area has been our work through the Zero Net Emissions Ag CRC. We're working with industry partners to develop commercially viable ways to reduce emissions intensity. Progress in this area is important and takes time. as we look to reduce our impact on nature while exploring new revenue opportunities. Under Unlocking the Value of the Land, we've reached an important milestone in our landscape carbon project at Gwent Harvest Nation in central Queensland. The project is now registered with the Clean Energy Regulator and is eligible for ACCU's with the first credits expected in coming years. These projects are designed to support our existing cattle production operations and are expected to improve productivity and enhance land quality. It's another example of how aligning with natural systems can deliver better outcomes whilst also supporting financial returns. This year we achieved Accounting for Nature certification. The scores and framework will now be used internally to measure and inform AACA's science-based nature-led approach and track improvements in the ecosystem condition of our properties. We've also continued to build sophisticated decision intelligence through our landscape segmentation system designed to optimise long-term land use across our portfolio. Innovation and insight are also being applied through Partner and Invest. As part of this focus area, AAKO is pleased to announce an investment in Sorensis, which is developing a non-surgical, long-term contraceptive implant for female cattle. The technology is expected to improve animal welfare, feed productivity and operational efficiency, whilst lowering costs, and we're looking forward to collaborating with Sorensis further on this. Our investment in Appian announced at the half year is also showing potential. IACO is working with Appian as they develop beef-specific methodologies for emissions reduction pathways that are both credible and commercially scalable for broader industry adoption. Several other partner invest opportunities are also under assessment as potential future sources of value for our operations and the broader industry. Taken together, our results and progress towards our plan reflect positive momentum and we intend to keep building on that in the year ahead. AACO's strong relationships and global distribution network continue to support our commercial delivery across the business. I'll share more about that now as we turn to slide 10. Our global approach to brands and markets delivered positive outcomes in 2026. We achieved an 8% increase in average prices while maintaining volumes, reflecting strong execution across our portfolio and disciplined management of market needs. The period wasn't without headwinds, including import tariff changes in the US and China, along with supply chain and market disruptions linked to the Middle East conflict. demand remains strong in the US, Asia and Australia, helping underpin pricing. The result shows deliberate investment behind our brands through expansion into new regions, improved routes to market and increased marketing activity, such as strategic partnerships with chef advocates. That investment helped us respond quickly to challenges and capture opportunities as conditions improved in certain regions. With total beef sales of $314.4 million, up $20.5 million on the prior period, we know our brand-led strategy is working. Let's take a closer look at how each brand contributed to that result as we turn to slide 11. Westhome is our flagship premium brand for nature-led Australian wagyu. With continued momentum across priority markets during the year, In North America, we expanded distribution and our customer base, with demand remaining resilient despite ongoing trade uncertainty. Brand growth has been deliberate, entering Mexico City and Hawaii in response to clear demand signals supported by targeted investments and trade engagement. To strengthen brand authority and drive demand, we launched a global chef advocate program across key markets. and implemented brand health tracking to build measurable equity over time. Our Pure and Forage programs are also deepening top end penetration in markets including US, UK and Europe, reinforcing West Home's premium position. Turning to slide 12. Darling Downs continues to play a key role in our brand portfolio. supplying high-quality wagyu into retail channels across Asia and Australia. In Korea, continued investment in building demand is delivering results, with brand awareness up and more effective in-store promotions driving record conversion rates. We also held our first consumer tasting and sensory event during FY26, generating strong media coverage engagement with insights informing future brand activity and investment. Across Asia, we expanded our reach by strengthening our presence in Hong Kong and Thailand and establishing new customers in Indonesia. In Australia, Darling Downs continued to grow its premium retail footprint with products now available in 13 Harris Farm locations. Supported by strong local relationships and targeted brand investment, we're seeing growing demand and value across our priority markets. Moving on to slide 13. Our 1824 brand reflects AACO's 200 year history and is well established in mainstream food service and butcher channels. It targets customers seeking high quality Australian beef at a more accessible price point, allowing it to play a complementary role in the portfolio without compromising other pricing opportunities. During the year, 1824 continued to grow branded sales, strengthening the brand and supporting overall returns. Demand remains strong in Australia, and we're also seeing positive early results from our expansion into the UK and Middle East. Taken together, the performance of our three brands shows the strength and breadth of our portfolio. And with that, I'll now hand over to Glenn to take you through our financial performance in more detail.

Thank you, Dave, and good morning, everyone. It's a pleasure to be with you here today and share our financial performance for 2026. As shown by the highlights on slide 14, we have built on our first half result to deliver an excellent four-year outcome. Operating profit, deep sales price and core free cash flow are some of the primary financial measures we use to monitor the business given they exclude unrealised market valuation fluctuations. Our operating profit of $71.6 million is up 23% on the prior year and is the highest result achieved since this measure was introduced. This was driven by strong beef and cattle sales performance. Average prices were higher for both beef and cattle sales while maintaining volumes, reflecting our ability to maximise the value of our assets. The 8% improvement in average sales price for our Wagyu beef was achieved through demand-building activities and optimised global market distribution, capitalising on opportunities across our brand portfolios. Core free cash flow is a primary metric we use to determine how we are performing as a business. This represents free cash flow, less in-year strategic investments as we reinvest to deliver on our priority areas. As shared with you in the first half, we believe this is an important measure as it highlights the underlying cash performance of the business and provides transparency on strategic investments made throughout the period. This year we achieved a core free cash flow of $0.8 million, which was an improvement of $11.4 million on the prior year, and I'll share more on that shortly. Our statutory result after tax of $107.3 million was a significant increase on the prior year, driven by the $128.6 million unrealised fair value gain on our livestock. While fluctuations in the market to market of the herd are largely unrealised and out We were able to capture market opportunities through the timing of our live cattle sales during this period, with higher sales revenue also contributing favourably to our statutory performance. Net tangible assets are now $1.8 billion, or $2.92 per share, up 15% on the prior year, which was a result of our improved livestock and property values. Cost control and supply chain efficiencies resulted in a stable cost of production. which is particularly notable given the high inflationary environment. It's an area we'll be managing closely as the ongoing Middle East conflict has ramifications across our supply chain into the next financial year. I'll now take you through the drivers of our performance in more detail as we walk through our profit and loss balance sheet and cash flow. Turning to slide 15. As Dave mentioned earlier, through our FY26 activities, we have delivered total sales revenue of $422.1 million, representing a 9% increase on the prior year. This uplift was driven by stronger results across both beef and cattle sales, and disciplined sales execution and strong demand improving pricing outcomes. At the core of our business is our Wagyu beef operations. Revenue was up 7%, with an average sales price 8% higher while volumes were broadly maintained, reflecting our ability to optimise product allocation across global markets and strengthen brand positioning. Our approach to markets, underpinned by our global distribution network and in-market teams, is key to our success. By having a diverse global footprint and portfolio of brands, our commercial team allocate product in a way that supports demand and maximises return. We've continued to see this play out in 2026 and it's something we are building on through our Better Beef focus area. Cattle sales also contributed positively to the year's performance, with prices up 17% as we adapted timing to capture market demand while streamlining our operational activities. This translated into a gross operating margin of $146.7 million, up significantly on the prior year, reflecting both price realisation and and discipline cost execution across our operations. Our underlying operating profit for the year, where we have adjusted for the impact of the North Queensland flood event, was $80.6 million. However, even after including the floods, our operating profit of $71.6 million is our strongest yet and one we are very proud of. It shows the resilience of the company as our initiatives create pathways for top and bottom line improvements. Now turning to slide 16. Our cash flow for the year tells a story about strong sales results with reinvestment back into the business to progress our strategy. As mentioned earlier, core free cash flow is an important measure we track, highlighting the underlying cash performance of the business if strategic investments did not occur in that period. We were encouraged by the improved results of $0.8 million, an increase of $11.4 million on the prior period. This remains a primary focus as our activities target growing cash generation, profitability and asset values. In line with our strategy, we have continued very intentionally to reinvest into key growth initiatives, including enhancing our herd genetic profile, expansion of finishing capacity at Ganu, development of the Glantana soil carbon project and targeting investments in innovation and partnerships. These investments have been supported by funding under our refinance debt facilities as well as improve business performance. Together, these initiatives show tangible progress across our priority areas. Moving to slide 17. Our balance sheet continues to strengthen, underpinned by our world-class assets. Livestock improved in value by $178.3 million, primarily due to the $128.6 million unrealised fair value gain of the herd. Whilst this was largely due to improved values from market conditions, through this year's appraisal process we also received positive feedback about the quality of our animals. The herd grew by 6% or nearly 30,000 to 482,000 head, even after taking into account the estimated losses from the North Queensland floods. This result reflects the work of our operation team and ongoing improvements in breeding and herd management. Our pastoral property values also went up materially in FY26 with 153 million increase reflecting market value improvements from our investment in intensive supply chain capacity and the high quality of these assets. As Dave mentioned earlier, previous infrastructure upgrades paid off during the period with minimal damage from the flood event. As with 2019, we'll use this weather event to further inform future capital expansion across our portfolio and build in additional resilience for our operations. Future investment is supported by our Clubjet facility, which continues to fund our key priorities and strengthen the business. With our gearing remaining at the low end of the board's target range of 20 to 35%, we have the capacity and flexibility to continue executing on our strategy for long-term returns. We believe this momentum validates the strategic direction taken by the board and management and thank all of our team members for their contribution through the financial year to these record results. I'll now hand back over to Dave to take you through the outlook for our operating environment and provide closing remarks.