Smoother sailing hopes ahead for Wellard after tough AGM

Smoother sailing hopes ahead for Wellard after stormy AGM


Wellard says challenging trading conditions will be reflected in its current half-year results, but live cattle export prospects are improving.

Wellard says challenging trading conditions will be reflected in its current half-year results, but live cattle export prospects are improving.

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A stormy annual general meeting in Perth has ended a “challenging start to listed life” for the troubled livestock exporter.

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A tense annual general meeting (AGM) in Perth has ended a year politely described by Wellard chairman, David Griffiths, as a “challenging start to listed life” for the troubled livestock exporter.

Almost 12 months after Australia’s biggest livestock shipping business listed on the Australian Securities Exchange, Mr Griffiths told shareholders the company was again likely to breach debt repayment covenants on December 31.

Despite posting a pro-forma net profit of $14.8 million for the 2015-16 trading year, Wellard has endured a series of high profile earnings setbacks and a share price collapse, starting with two of its key vessels, Ocean Outback and Ocean Shearer, forced into dock for nine weeks early this year to have crankshafts replaced.

Replacement ships were chartered to help out, but the extra costs weighed on the company’s budget, which by mid-year was also under pressure as good seasonal conditions pushed cattle prices to record highs Australia-wide, slashing the export trade’s profit margins.

“Our cattle buyers were struggling to source cattle no matter what price they offered,” Mr Griffiths told Tuesday’s AGM.

He said trading conditions continued to be challenging and would be reflected in the half-year result.

However some positive signs were emerging, including a slight fall in cattle prices and the Australian dollar.

“Importers have been able to pay a little extra for cattle,” he said.

He also expected the company’s live export trade to China would commence in the coming six months, “absorbing a significant amount of its shipping capacity and improving trading conditions”.

Normalised trading conditions were likely by 2017-18.

Wellard was dealing with its bankers to amend or waive its working capital breaches, which have followed similar missed targets in September.

Mr Griffiths felt “constructive dialogue” with the company’s lenders would “work through any issues arising from the coming half year result”.  

However, Wellard’s shipping and domestic abattoir business was torpedoed by a shareholder “first strike” protest vote against its AGM remuneration report, with managing director, Mauro Balzarini, refused a 500,000 share option bonus by a 56pc majority vote.

Share options for other executive staff were also denied.

Wellard’s directors now face a potential board spill at next year’s AGM year if another protest vote of 25pc or more is recorded against them.

Four of the AGM’s 10 resolutions were rejected, including attempts to tip the directorship balance against Mr Balzarini who holds a controlling stake in what was previously his family company.

The cool shareholder mood is unlikely to warm up in the short-term with Wellard’s share price now tipped to slide further below the 19 cents low of early this week following reports the company’s second biggest shareholder, Butt Nominees, is off-loading 10m shares.

Butt is controlled by Pakistani businessman, Tariq Butt, and prior to the AGM held about 57m shares or 14.4 per cent of the company.

Butt nominees was unable to win a board position for its executive Tyron Dennison, after China's Fulida Group, Wellard’s second-biggest shareholder, sided with Mr Balzarini to defeat the motion.

Former Hancock Prospecting executive, John Klepec, was elected to the board with Mr Butt’s support.

Wellard, which listed at $1.39 a share last December, then peaked at $1.44 has been one of the ASX’s worst performing floats of 2017.

Mr Griffiths admitted repeated profit downgrades had damaged the company’s credibility and “everybody is aware of the share price impact those downgrades have caused”.

“Wellard must now work hard to earn the trust and confidence of investors through operational excellence, solid and improving financial results and, at the right time, growth,” he said.

Mr Balzarini told shareholders the company had exported 424,972 cattle in 58 shipments in 2015-16 and was expecting to take advantage of greater cattle numbers on the market after the 2016-17 wet season.

Ships not deployed on Australian cattle export routes had begun freighting cattle from Brazil and Uruguay to China, Egypt and Venezuela.

Wellard also exported 23,000 sheep and goats (mostly to Israel) and processed 361,000 sheep at its Beaufort River Meats site, starting sheepmeat exports to the US in March and by-products to European pet food markets.

Its other, more prominent, sheepmeat markets outside Australia include Jordan, the Arabian Gulf, Thailand and Taiwan.

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