Wellard shares dropped to an all-time low of 14.5 cents on the news, down 25.6% on the day after revealing its financial and trading position was worse than expected.
Wellard, which is Australia’s biggest live cattle exporter told the ASX it expects to post an annual loss as high prices for local cattle weigh on demand from Asia.
Wellard expects that its trading loss in the second half of the financial year will be significantly larger than its $16 million first-half loss, and indicated an annual pre-tax loss of between $55 million and $65 million.
"The Company is continuing to work through its year-end audit process and as a result a number of matters remain subject to further review. However, the Company expects its potential losses before tax for the full year to be in the range of $55-65M, excluding impairments on vessels.
That excludes any impact from potential asset impairments and write downs. Complicating matters has been what Wellard said had been ongoing breaches of its banking facilities
"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,” the company said yesterday.
Wellard told the ASX cattle prices in Australia remain “uneconomically high” as farmers hold stock and grow their herds.
“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,” the company said on Tuesday.
Wellard said its previous expectations of market improvement at this point in the season had not materialised, with conditions remaining extremely difficult.
“Our markets continue to defy normal seasonal trends, with previous positive signals being brief and not sustaining,” managing director Mauro Balzarini said.
Exports of feeder and slaughter cattle across the industry were also significantly lower.
Wellard said it is continuing to review operations and costs and has cut staff and overheads in its domestic and overseas operations.
The company has improved its trading terms with suppliers and is chartering vessels to third parties to help cover vessel costs and long periods of under- utilisation.
Wellard has completed the sale of its ship, the M/V Ocean Outback, which will return about $17.6 million to the company, and retire about $15.6 million in debt.
