Agribusiness

Wellard says profitable 2014 expected after 2013 loss

James Nason, 18/12/2013

Wellard Rural Exports' Ocean DroverAustralia’s largest livestock exporter says it expects to return to profitability in 2014 after posting a $53 million loss for the year to June 30.

News Limited outlets reported late last week that the livestock export giant has hired consultants to assess a partial sale or restructure in the wake of the loss.

However, in a statement to Beef Central, the Wellard Group says it has retained corporate advisers at numerous times over the past five years to assess expansion projects and this year was no different or related to its 2013 result.

Wellard said its 2013 financial result was significantly affected by one off, non-cash impairments of non-core assets, and it expects to return to profitability in 2014.

Financial accounts lodged with ASIC by the Wellard Group this month show that the company went from posting a profit of $841,302 in 2012 to a loss of $53m in 2013.

Revenue fell from $416.2m in 2011-12 to $311m in 2012-13.

The drop in revenue was attributed to the loss of live sheep markets in the Middle East and northern Africa, restricted quotas from Indonesia and shrinking margins due to lighter volumes and increasing competition across the trade.

The company’s exports of live sheep fell from 621,400 head to 466,422 in the year to June 30, while cattle dropped from 253,401 head of cattle to 99,796.

The Australian reported last week that the cash squeeze created by falling revenues and substantial fixed-cost overheads had pushed Wellard earlier this year to hire the McKinsey consultancy company to assess a sale of key assets or divisions and a restructure.

However the report noted that the consultants were not currently advising the company.

Wellard was founded by the Perth-based Balzarini family as a live exporting company in 1979. The Wellard Group is now a conglomerate with interests in shipping, land holdings, farm machinery and transport, communications and mixed farming across Australia, New Zealand, Asia, the Middle East and South America. The Balzarini family remain the controlling shareholder. UK banking heavyweight Standard Chartered invested $83m in the company to become its second biggest shareholder in 2011, just four months before the Gillard Government imposed a snap ban on exports to Indonesia over animal welfare concerns.

After a subsequent two year downturn, the major market of Indonesia has returned to taking high-volume cattle imports from Australia in the second half of this year, with Wellard's ships playing a key role in providing the shipping capacity required to keep Indonesia supplied with the large cattle numbers it now requires.

The company previously posted profits of $10.8m in 2010 and $4.3m in 2011.

News Limited news site Business Spectator also reported on Friday that wealthy Saudi Arabian and Brazilian investors are eyeing livestock export giant Wellard Group’s shipping and land assets.

In a statement to Beef Central this week, Wellard Rural Exports said it was not in negotiation with Saudi Arabian or Brazilian investors as had been reported.

It said the company was expecting to return to profitability in 2014 after its 2013 result was significantly affected by one-off, non-cash impairments, and was currently looking at a number of expansion projects at present.

“With the current interest in Australian agriculture, Wellard continues to receive a variety of business proposals from numerous sources,” the company statement said.

“Throughout the past five years Wellard has retained corporate advisers at numerous times to assess expansion projects, and now is no different.”

Wellard listed the larger one-off impairments that impacted last year’s financial figures as interest expense adjustments; impairment losses on investment; changes in fair value of biological assets and inventories (i.e. reduction in the mark to market valuation of the company's sheep flock and cattle herd – as an example boat wethers declined in value from $120/head in June 2012 to $60/head in June 2013, and live export steer prices dropped from 175c/kg to 150c/kg) and net unrealised foreign currency losses.

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