Record Year for WAMMCO

Producer owned  Western Australian Meat Marketing Co-operative Ltd has announced a record profit of $5.4 million for year ended 30 June 2005, after providing a first ever bonus pool distribution to qualifying producers of $825,000.

Earnings before interest, pool bonus, tax, depreciation and amortisation (EBITDA) was $7.8 million, or 8.5% as a percentage of sales.  This was nearly double the previous year’s figure of 4.6% and indicated the continued strong trading performance of the co-operative, Chairman Dawson Bradford announced

The profit of $5.4 million was up $3.6 million over the previous year’s record of $1.8 million with turnover increasing $9.5 million to $92.1 million.

The increase in operating surplus is attributable to improved margins generated mainly from achieving higher lamb revenues from value-adding product to premium markets, which averaged an additional $3.07 per head.  This was achieved despite a 5% appreciation of the Australian dollar against the US currency during the year.

Capital expenditure for the year was $2.317 million and the increased profit also resulted in the retirement of a significant proportion of the co-operatives debt.

The pool bonus will be distributed to 531 qualifying producers who will receive between $1.21 and $6.10 per head depending on the value of lambs they delivered, with a distribution of 40 percent in cash and 60 percent in shares.
 
Mr Bradford said the 2004/05 pool bonus resulted from a Board decision in 2000 to rationalise and shift WA’s lamb production industry from high volume, to high quality, heavier lambs targeting the US market.

He said WAMMCO had enjoyed a growing share of Australian lamb exports to the US which had increased by 273 percent to 32,000 tonnes since 1995, with an even more significant increase in value of 560 percent to $211.6 million.

The cooperative is in the process of acquiring a strategic shareholding in a major US-based lamb importer and distributor to secure and improve its access to the US market.

A feasibility study was also under way to identify opportunities to increase the co-operative’s processing capacity to meet anticipated increased lamb production.

However continuing labour shortages remain a challenge to future development.

Other highlights of the 2004/05 year included:

• Construction of a 1500 pallet coldstore at Katanning to avoid double handling of frozen product in Perth.
• Welcoming WAMMCO’s first cash contributing producer shareholders
• The appointment of lamb researcher Dr Rob Davidson as Supply Development Manager, and the installation of  VIASCAN video imaging technology at Katanning to assist lamb producers.
• WAMMCO’s winning WA’s Agri-business Export Award to become a national finalist.

In his report to members Mr Bradford quoted an International Feed Industry Federation forecast that world animal protein production would have to treble by 2050 to meet population growth and improving living standards in countries such as China.

Also quoted was the prediction by Meat and Livestock Australia that Australian lamb exports to the US would more than double to reach 65,000 tonnes over the next five years.

The co-operative was active in providing lower value cuts of lamb to developing markets such as China, South Africa and New Guinea and was well placed to take advantage of opportunities as they arose.

“Australia is well positioned to take advantage of its clean green image and the potential health benefits of eating lamb. Couple this with the predicted growth in protein demand and we have every reason to be confident about the future for prime lamb.”

The co-operative believes that higher producer returns from prime lamb were more likely to come from increased on-farm productivity than from any increase in lamb prices which remained at historically high levels.