And shares in Australian Agricultural Company slumped sharply yesterday after the beef producer said it expects a statutory earnings loss of between $30 million and $40 million for the year to March 30 2018.
AACo said it will take a hit of $60 million to $65 million related to its Livingstone Beef processing facility near Darwin, including an impairment charge on the carrying value and an onerous contract provision. That seems to be at the core of many of the problems revealed yesterday.
That will see the company report Operating earnings before interest, tax, depreciation and amortisation of between $12 million and $16 million, 65% to 73% lower than 2017.
“We have undertaken a comprehensive operational review focused on diagnosing the current business model and identifying the changes that need to be made to improve shareholder returns, increase profitability and drive cash flow generation across our supply chains,” AACo CEO Hugh Killen said.
“We recognise that AACo’s recent financial performance, including the FY18 result update outlined today, are below expectations," Mr Killen, who took over at AACo two months ago, said on Wednesday.
"The new management team is fully committed to executing the changes required to enable our strategy and improve financial performance."
AACo said its performance in the second half of the March 31 year had continued to be affected by increased competition in some markets, a higher Australian dollar, higher feed prices, and the elevated cattle price environment for Livingstone Beef.
AACo has begun a strategic review of Livingstone Beef, which started operating in February 2015, to determine how to better value for shareholders from the operation.
"While this strategic review is under way, management will continue to focus on the controllable aspects of this production process, including further improving the operational efficiency of the plant," Mr Killen said.
The company says it is also examining the group’s supply chain to improve processes, cut costs and lift the profit margin. The changes include moving to a cattle sale model in the non-wagyu short-fed beef supply chain, rather than selling beef. (which would be something of a reversal of the current strategy).
"The impact of this decision of AACo’s financial profile will be a reduction in the volume of beef sales in the premium (non-wagyu short-fed) supply chain and an increase in the volume of cattle sales," Mr Killen said. Mr Killen said AACo is not considering selling its cattle properties and cattle and returning cash to shareholders.
The shares ended down 8.2% at $1.12 after being down more than 10% in early trading.
Budget jewellery retailer Lovisa shares were whacked yesterday in the wake of Tuesday’s shock news that chief executive Steve Doyle will be leaving the company to follow other interests on April 20.
Shares in Lovisa fell more than 8% at one stage before settling down 6% at $9.40.
Mr Doyle is the second senior executive to go since last September when the then CFO quit.
Some analysts wondered why such a successful company (the shares are up 179% in the year to Tuesday with fast growing sales and earnings ) has managed to lose two senior executives in six months.
