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## OPERATING AND FINANCIAL REVIEW (CONTINUED) 

## 4. Farming Operations 

Farming yields continued to perform and farmgate prices were within budget expectation. The table below sets out the crops harvested: 

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(1) Cotton harvest in 3 months to 31 March 2012 was delayed due to seasonal conditions. 

(2) Ginning is yet to be completed on the 2013 cotton harvest. The yield estimates are based on current cotton ginning turnouts. 

(3) Wheat, chickpeas and sorghum not harvested in the three months to 31 March 2013. 

The accounting standard for Agriculture only permits the value of the 15,120 bales of cotton harvested, but not yet ginned or delivered, to be recognised in these financial statements. This value recognition is derived from market spot prices at the time of harvest. The estimated 2013 cotton harvest at 31 March 2013 is forward sold at an average bale price that is $22 per bale above the spot market at the time of harvest. 

## 5. Wholesale Beef Operations 

AACo’s Wholesale Group had a 65 per cent increase in kilograms sold for the first quarter. The major contributors were larger numbers of AACo’s signature “1824” beef brand and improved inventory management due to new customer and market development. 

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The development of an integrated supply chain from the feedlots to the wholesale beef operations continues. This development will be furthered with the commencement of the Darwin abattoir operations and provide the Group’s wholesale beef division with broader market access. 

The division continues to perform on lower than desired margins due mainly to the high AUD/USD exchange rate. 

## 6. Other Cost Areas 

Overheads in the three months to 31 March 2013 have increased over the prior corresponding period due in part to the expansion of the senior management team as operations are being established and expanded to manage the Darwin abattoir and the expanded sales in the Beef Group that will arise from the anticipated abattoir production. 

These cost increases have also come about due to increased compliance costs, the further progress of the Darwin abattoir project, IT infrastructure costs, as well as increased satellite usage and other telecommunication costs. Some of these cost increases are transitionary and as systems are developed the Group expects to enjoy increased productivity per indirect cost person. 

## 7. Shareholder Returns 

The Company derives its returns from its two main asset holdings, cattle and land. Cattle provide earnings/cash flow and land provides potential for capital growth. Underlying capital growth in land is not shown in net profit after tax but is reflected in the Statement of Comprehensive Income and directly into equity in the Statement of Financial Position. 

