Australia's largest cattle and beef producer is mothballing its unprofitable abattoir in the Northern Territory, creating uncertainty for around 220 workers.
Australian Agricultural Comany (AACo) said operations at the Livingstone Beef meatworks south of Darwin would cease by September 30 in order to put an end to its ongoing operational losses.
An impairment of $74.9 million has also been incurred against Livingstone Beef, which contributed to AACo's full year loss of $102.6 million.
Chief executive Hugh Killen says Livingstone, which opened only three years ago and specialises in low cost meat such as hamburger mince sold mainly to the US, was up against high cattle prices, high labour costs and a range of other increased costs driven by dry weather.
"While the operation of Livingstone Beef is not profitable today there could be an opportunity in the future where market conditions means it is a profitable plant," Mr Killen said.
"We believe there is value but at the moment it is just not economical for us to run."
The company said there will be redundancies, but some staff will be redeployed and others will be kept on to maintain the mothballed plant.
The suspension will simplify AACo's operations and allow the company to focus on its high growth luxury wagyu brands, Mr Killen added.
The abattoir was described as the most technologically advanced of its kind in Australia when it was opened by then Prime Minister Tony Abbott in February, 2015.
AACo said Livingstone's property, plant, equipment and working capital had been valued at $109.7 million at the end of March, but high cattle costs and lower than average meat demand had slashed the value of the recoverable assets to $40.2 million.
AACo made an earnings loss in the 12 months to March 31 of $35.3 million, due to the underperformance of Livingstone and a lower value for its herd of cattle.
Mr Killen said conditions in the first half of the company's 2018/19 fiscal year continue to be challenging, but the company will tackle this with cost and supply chain efficiencies, including efficient feed use and cattle movements.
He said AACo's advantage over its competitors was its ability to produce the highest quality beef at scale and its blue-chip portfolio of land, herd and brand assets.
Shares in AACo were down one cent at $1.112 at 1500 AEST.
HIGH COSTS AND COMPETITION HIT AACO:
* Net loss of $102.6m v. $71.6m profit in FY17
* Sales revenue down 17.6 pct to $379.7m
* No final dividend, unchanged from previous year.
