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The Australian agricultural company limited 2



TheAustralian agricultural company limited

TheAustralian agricultural company limited abbreviated AAC is theproducer of agricultural products as well as beef products inAustralia. It had been functional since 1824 when the company becamefounded via a British parliament Act. It is the Australian oldestcompany that is still operational to date. The company carries outthe operations of grazing as well as farming properties. It is alsoinvolved in breeding beef cattle, growing, trading and feed lotting.It also adds value to the beef business that is related to thewholesale marketing of meat. Australian agricultural company alsoservices the beef to its customers in both locally and globally. Thecompany serves towards the improvement of beef cattle production. Theachievement of the improvement will be through responsible land useand natural resource.

Thecompany under its chairman is formulating strategies that are aimedtowards improving the performance of the company’s operations. Thechairman explained to the board of governors that this strategy willnot be possible unless achievements on some improvements on thesupply chain management of the company. The company has alsohighlighted opportunities that will develop a vertically integratedmodel of business. According to the chairman, it will be enhanced bycattle trading expansion as well as improving the activities of beefprocessing. The company aims at the development of an allianceprogram and also a breeder. It will include the leasing of thepregnant cows to some selected cattle farmers.

Thechairman Donald McGauchie stated that there are plans in progress ofa meat processing plant establishment. The plant will be in Darwin.There are improvements being made to the profile of the herd. Theimprovement entails reduction in the average age of bulls andbreeding cows. These improvements aim at the accomplishment of thecompany’s three year plan. The chairman also indicated that theformulation of plans to split the company was not available. However,there are underway plans for the company`s assets improvement. It isto be achieved by the company forming itself into an integratedproducer. It will, therefore, attract international prices that arehigher than the local prices (Malcolmet al. 2005).

Inhis statement, the chairman indicated that it is clear that thecompany cannot afford to remain as a primary producer. The companycan be termed as the largest farm holder and also beef producer hasmade plans with Joe Lewis a shareholder in the company to launchnon-pronounceable rights and also convertible notes. It is in theefforts of lifting the returns of the company (Malcolmet al. 2005).The company also wishes to reduce volatility that comes as a resultof the land they possess and also the case of dependence on the localprices.

Thecompany has formulated plans to gain $219.2 million. It will be madepossible by 7-for-10 issue of shares to the present shareholders ofthe company. The shares will earn the company one million dollarsthrough the UBS. The company will also sell out convertible notesworth $80 million to one of its trustees Mr. Lewis. It will, however,cost the company interest of 3% on an annual basis. These efforts aremade to realize the money required for the construction of Darwinabattoir. The current amount available is $24 million thus $67million is required to have the whole amount. After thisconstruction is completed the company will be able to process 200,000cattle annually.

Theplans towards the construction of a new abattoir were as theformulation done by the former chief executive of the company. He hadthe idea of taking the advantage of the increased number of cattle asa result of the export ban by the government. The government hadtaken this step due to the cruel behavior of the Indonesianabattoirs. The step by the state led to the collapse of the prices ofcattle in Australia while, on the other hand, the internationalprices were increasing. The chairman indicated that the company hasthe intention of meeting the higher margins on the internationalbasis.

Theresources that will be raised will also be effective in meeting thedebts of the company. The company currently has a bank loan of $412million which the management hopes to reduce to $ 248 million. Theconvertible notes will see their clearance. As a result, the overallcompany debt will fall from 40.9% to 23.5%. Mr. lewis who happens tobe a 13.5 % shareholder of the company will have his full entitlementmade, he has also agreed to underwrite the company an added 34.6million and his shares increased to 19.9%. Another shareholder tothe company IFFCO Felda has declined to involve itself in raisingfunds of the company. Therefore, it will see its interests diluted(Malcolmet al. 2005).

Thechairman also stated that the level of debts were very high for thecompany that is planning its transition. He also told the board thattheir main focus should be towards the improvements of the returns oncapital and returns. He said that the return on capital is aparamount aspect for the company’s development. Mr. DonaldMcGauchie also noted that it is essential for a company to be worthmore than its parts’ sum (Malcolmet al. 2005).


Malcolm,B, Makeham, J, &amp Wright, V 2005,&nbspThefarming game: agricultural management and marketing.Cambridge, Cambridge University Press.