BRISBANE’S largest live cattle exporter has put ethics before profits by supporting the Federal Government’s Indonesian live export ban.
Australian Agriculture Company (AAco) CEO David Farley released a statement on behalf of the board, saying the ASX-listed beef producer notes and supports agriculture minister Joe Ludwig’s decision.
Farley concedes the temporary suspension will have an adverse financial impact on AAco’s 2011 result.
“Indonesia has been a destination market for AAco cattle, however AAco will not resume sales to Indonesian importers until a full cycle of humane, proper and correct processing can be demonstrated and secured by the importer,” he says.
“The board, management and staff of AAco were equally disturbed, along with all Australians, to view the graphic and horrific footage recently shown on Four Corners of animals being mistreated in some Indonesian abattoirs.
“The board welcomes the commitment by the Hon Senator Mr Joe Ludwig, to work with the industry to ensure the important live cattle trade is humane and sustainable in the immediate and longer term.”
The appointment of Farley in 2010 saw a dramatic shift away from processing to live cattle trading. Under his new strategy, he managed to turn around AACo’s performance from a $57.3 million loss in FY09, to a $1 million profit in FY10.
Despite the expected financial losses to the company, Farley says the reviewed financial forecasts still indicate AAco will post an EBITDA (earnings before interest, tax, depreciation and amortisation) of $50-60 million for 2011.
Given its 2010 EBITDA was $41.3 million, shareholders can still expect an improvement on last year’s financial result.
“The forecast impact of the suspension has been partially mitigated through the excellent seasonal conditions being experienced; AAco livestock management systems and processes; and favourable results arising from completion of the 2011 cotton harvest and other cropping programs,” says Farley.
“Cattle previously designated for live export can be potentially redeployed to AAco’s properties for other sales programs. Appropriate reductions can then be made to the previously forecast cattle purchases that would no longer be required.
“Further, the company’s plan is well advanced for the construction of its own abattoir near Darwin, due for commissioning in the second half of 2012.”
AAco’s support for the ban comes a day after industry and political opposition slammed the decision as ‘drastic’.
Shadow minister John Cobb condemned the decision by stating the move sends the wrong message to facilities that have committed to international best practice standards.
“In Indonesia we are told there are 25 abattoirs – A and B grade facilities – that comply with internationally agreed standards. Restricting trade to these facilities would have created market pressure for others to lift their game,” says Cobb’s joint media statement with Nationals leader Warren Truss.
“The announcement will cause an immediate drop in the cattle market across Australia and devalue existing meat in stores. There is now no market for many of northern Australia’s cattle.”
Meat & Livestock Australia (MLA) chairman Don Heatley was also quick to offer an alternative solution, believing industry ‘will not tolerate cruelty to their animals’.
Under the MLA system, only Indonesia’s top 25 abattoirs would receive Australian cattle and an Australian animal welfare office would be stationed at the facilities to oversee operations.
“This step will ensure that only the best 25 facilities receive our cattle. These facilities currently account for around 40% of Australian cattle sent to Indonesia,” says Heatley.
“The Australian industry is also committed to introducing improved infrastructure in these facilities and transitioning as many as possible to stunning. Facilities in the remaining categories will not receive Australian cattle until they can be guaranteed to meet accepted standards.
“This issue has made it clear that we must only allow our cattle to reach those facilities where we can be absolutely confident they will be handled in line with internationally accepted welfare practices.”
AAco shares (ASX:AAC) entered a brief trading halt this morning while the company prepared its statement. Shares are now trading at $1.35.
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