Wellard eyes future profit turnaround as prices bite

Record cattle cost and scarcity seen ending in fourth quarter, leading to better performance

Wellard eyes future profit turnaround as prices bite
Record cattle prices have crimped Wellard’s financial performance


Wellard has appears to have staunched bleeding revenues, with the help of a new ship, but that has yet to be felt on the first half bottom line.

Though revenues rose 2.3 per cent to $281.9 million, the livestock logistics and supply firm that has experienced a series of setbacks since its stock exchange listing recorded a net profit loss of $17.9 million, a 25 per cent improvement on the previous first half.

Management put this down mostly to costs related to its "initial public offering [IPO], the integration, restructuring of the group, and the impairment of assets" but cattle scarcity and record high prices also hurt.

The company is waiting for the northern dry season for a return to profitable trading in the fourth quarter of the financial year and the following financial year after "another excellent cattle growing season" there.

"There are signs of a downward trend in cattle prices and this is expected to continue in line with the usual seasonal supply periods," the company says.

"As prices ease the Group expects to see an increase in demand from the traditional live cattle export markets in South East Asia as well as an improvement in margins."

Plant and equipment purchases fell 90 per cent to $6.65 million, while payments to suppliers and employees rose 20 per cent to $298.6 million.

The company has seen its new ship, the mid-sized Ocean Kelpie, take its first voyage to China, the trade it was designed for.

Though early days for the trade, Wellard believes most Chinese live cattle importers are "waiting for Australian cattle prices to reach a level where it is economic to enter the market".

"As previously indicated, Wellard continues to be impacted by the scarcity of cattle available for sale in Australia which has resulted in record high cattle prices and historically low trading margins as the increase in cattle purchase prices was unable to be fully passed on to customers," Wellard CEO Mauro Balzarini states.

"Wellard paid 76% more per kg for its cattle in the first half of FY2017 than it paid in the first half of FY2015.

"Wellard is actively seeking to strengthen its working capital position through negotiating improved trading terms with suppliers as well as assessing options including the possible sale of asset values and/or raising additional debt and/or equity,"

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