According to The Australian Financial Review, the nation's biggest Wagyu beef producer, Australian Agricultural Company, says it will benefit from higher sales next year after it built up its herd at the expense of short-term cash flows in the six months to September 30.
Sales revenue plunged 17 per cent to $214 million, with the company blaming a decision to increase feed days for its Wagyu herd and reduced product for sale and cut sales of non-Wagyu and live cattle.
AAco managing director Jason Strong told shareholders he was pleased with the company's progress in transforming to a vertically integrated producer that could be a price maker rather than a price taker by marketing branded products.
He said the company began to see some returns from its transition but "we are far from finished".
Mr Strong said AAco had continued to integrate its supply chain in the six months to September 30 in order to ensure consistent supply to each of its beef programs.
"Our increased knowledge of supply and demand across the supply chain signalled that we needed to build cattle inventory in the first half of the year to ensure consistent supply in the second half of FY17 and throughout FY18," Mr Strong told shareholders.
"While this has impacted cash flow in the short term, it will ultimately result in improved returns from beef sales in the coming periods."
AAco wants to position itself as a global luxury beef brand manufacturer, launching its Westholme and Wylarah brands in Singapore in October.
Mr Strong said the company would launch the brands in other key markets over the next 18 months.
"The [Singapore] launch was the latest step to transform AACo to a vertically integrated business selling luxury beef brands, fundamentally changing the way we sell and deliver our products to consumers," Mr Strong said.
"This strategy will underpin the ongoing incremental increase in our average sale prices."
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