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