More Wellard losses as tough live export trade bites

Financially-stretched livestock exporter, Wellard Limited, has flagged its losses are mounting after a much tougher finish to the financial year than expected.

Trading losses for the second half of 2016-17 were likely to be “significantly higher” than the first half-year’s $16 million, pushing full-year losses to between $55m and $65m.

Shares in Wellard lost more than a quarter of their value on Tuesday after its gloomy forecast.

The stock dived as much as 28.2 per cent to a record low of 14 cents.

Australia’s live feeder and slaughter cattle exports have slumped 38pc in the first six months of 2017 in comparison with the prior corresponding period, according to latest live trade industry figures.

Wellard, Australia’s biggest cattle exporter, recently sold one of its vessels for $17.6m to reduce its debt load.

However, the company has continued to struggle to buy Australian cattle for export at prices low enough to excite overseas buyers.

“Our previous expectations of market improvement at this point in the season have not materialised, with conditions remaining extremely difficult,” said Wellard managing director, Mauro Balzarini.

The price of cattle in Australia remained “uneconomically high”.

Live exporters and abattoirs faced considerable competition for cattle from beef producers who were either building their herds or simply holding stock to take advantage of available pasture.

Favourable conditions in northern Australia were particularly relevant following the northern Australian wet season.

The company said sustained high prices had suppressed interest from traditional Indonesian and Vietnamese markets.

Buyers were reducing their cattle purchases, unwilling to absorb or pass on the increased sourcing costs.

Total Australian live exports to Indonesia last month fell more than 60pc, compared to the same period last year.

Wellard has also reported “an extraordinary loss”  worth up to $10m on one voyage from South America.

The costs were incurred because of shipping delays which caused some cattle en route to fall out of sale specification, needing to be sold to another buyer at lower than expected prices.

Total loss results for the 2016-17 year, to be reported late next month, will also be impacted by asset impairments and write-downs.

“Wellard is disappointed to be in this position,” Mr Balzarini said.

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

However, the company remained focused on improving operational flexibility to be ready when markets improved.

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

The sale of its Ocean Outback vessel would retire about $15.6m in debt and an impairment worth about $13.1m would also be written down when financial results were finalised.

Mr Balzarini said a recent capital raising had left Wellard in a positive cash position, and its banks were “supportive” despite some “ongoing breaches of various banking facilities at June 30”.

Wellard was continuing to review its operations and had cut costs including staff and overheads in Australia and overseas.

It was also improving its trading terms with key supplier partners, and chartering vessels to third parties where possible, to improve its cash flow.