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Wellard anticipating ‘significantly higher’ losses for FY2016/17 second half

by Beef Central, 18 July 2017
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Wellard Rural Exports has informed the ASX it is expecting trading losses from the second half of the 2016-17 financial year to be “significantly higher” than the A$16 million loss it reported in the first half.

In a statement to the ASX issued today Wellard said it is currently finalising its FY2016/17 audit and annual results, and the total loss will not be fully known until closer to the end of August.

However in a second statement Wellard said it expects its potential losses before tax for the full year to be in the range of $55-65 million, excluding impairments on vessels.

It says the overall loss will be impacted by asset impairments and write-downs.

Reasons cited for the loss included a reduction of demand from South East Asian markets due to sustained high cattle prices in Australia, and an “extraordinary loss on one voyage in South America”.

In respect of the anticipated loss related to the voyage in South America, Wellard said the loss reported in this financial year is likely to be in the range of A$8M to A$10M. “This loss arose as a result of delays which caused some cattle to go out of specification, after which some stock was sold to another buyer at lower than predicted prices. This issue relates to the specific voyage only and does not indicate any mechanical issue with the Wellard vessel involved,” the statement said.

The statement said industry results for the calendar year-to-June for feeder and slaughter cattle exports were 38 percent lower, compared to the prior corresponding period.

“The price of cattle in Australia has remained uneconomically high, with live exporters and abattoirs facing considerable competition for cattle from growers both holding stock and building their herd,” it said.

“These sustained high prices have meant that the traditional Indonesian and Vietnamese live export markets have been depressed, with buyers reducing the number of cattle purchased and not willing to absorb or pass on the increased costs.”

Wellard said it has now completed the sale of its ship, the M/V Ocean Outback, which will return approximately A$17.6M cash to the Company, and retire approximately A$15.6M in debt.

“An impairment of approximately A$13.1M will be realised, as previously announced.”

“Following this year’s capital raising, Wellard’s cash position remains positive, and its banks supportive.

“As previously announced, there are ongoing breaches of various banking facilities at 30 June 2017, however the Company is working with its banks on the provision of waivers”.

Wellard said it has continued its operational review and costs-out program, and has reduced headcount and overheads in both international and Australian domestic locations.

The statement said Wellard has improved its trading terms with key supplier partners, and is continuing to charter vessels to third parties where possible, which assists to cover outgoings on the vessels and avoids long periods of under-utilisation.

“Wellard is disappointed to be in this position.

“Our previous expectations of market improvement at this point in the season have not materialised, with conditions remaining extremely difficult. This is evidenced by more than 60 percent drop in exports to Indonesia in June, compared to the same period last year.

“Our markets continue to defy normal seasonal trends, with previous positive signals being brief and not sustaining.”

“Wellard remains focussed on improving operational flexibility to be ready when markets improve.

“Our stronger balance sheet with higher cash and lower debt, plus a lower fixed cost base will help us to sustain this market downturn and will allow us to return to profitability once conditions improve,” said MD Mr Mauro Balzarini.

Wellard is due to release its final FY2016/17 results at the end of August.

Source: Wellard Rural Exports/ASX

 



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Reader's Comments


Comment
  • Lee Clarke July 18, 2017

    Soon to be going cheap. A fleet of floating cattle yards.

  • John Edaward July 18, 2017

    Current board manage the company badly. Please vote to replace the current board in coming AGM!

  • Sandy Maconochie July 18, 2017

    Such a shame the many times Ag companies publicly list on ASX with high return forecasts, only to realise subsequent poor results. Unfortunately only too often this occurs. Some others that spring to mind are Murray Goulburn, Primeag, Elders and to a lesser degree AA Co., to name a few. Obviously there is always a reason but little wonder Collins and Pitt Streets scratch their heads. Agriculture has many success stories to tell but in many cases doesn’t manage other people’s money well.

  • Tim Paterson July 23, 2017

    Seems to me that if you tear up a third of your supposed market capitalisation in one year after tearing up another large piece the year before it can’t be long before the banks and other creditors start to think that it’s time to shut down the whole sorry disaster

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