Embattled dairy company Bellamy’s (BAL) has unveiled a $60.4 million capital raising that will help it take control of a new canning facility and recast its supply arrangement with Fonterra.
Bellamy’s shares were placed in a trading halt on Tuesday after the company announced the fund raising and a deal to buy a 90% stake in the Camperdown Powder canning facility in Melbourne.
Bellamy’s says the one-off costs related to the acquisition of the Camperdown Powder canning operation and the revision to the Fonterra supply agreement will result in Bellamy’s reporting an earnings loss in the second half of the current financial year.
Bellamy’s expects of an earnings before interest and tax (EBIT) loss of between $9.5-$14 million, instead of the previously forecast EBIT profit of $9-$13 million for the June half.
But it says the “normalised” EBIT guidance, which excludes the one-off costs, has been increased from $11-$15 million, to between $16.5 million and $20.5 million. The increase in normalised EBIT is due to the removal of a $5.5 million shortfall payment to Fonterra which is no longer payable under the revised agreement
In a statement to the ASX Bellamy’s said the deal was one of "several key initiatives" which it said would "underpin the company’s turnaround plan".
It told the ASX it had signed an agreement to buy control of Camperdown, for $28.5 million which would add “a high potential manufacturing asset at a fair price, with an opportunity to upgrade both the quality and capacity of the facility".
Bellamy’s will pay $10.5 million in cash and pay for the remainder in 3.2 million Bellamy’s shares.
The canning facility, in the Melbourne bayside suburb of Braeside, is a CNCA (Certification and Accreditation Administration of the People’s Republic of China) licensed site. It should help Bellamy’s replace the certified canning capacity lost from Bega’s decision to sell its Tatura factory to Mead of the US.
Bellamy’s also explained that it had “reset” its supply agreement with the major dairy processor, Fonterra Australia. The binding agreement, which Bellamy’s said would cost $27.5 million, would bring a number of advantages including increased operating flexibility.
Bellamy’s said the new deal would still see it having to pay penalties for shortfalls in production but that the new targets were more closely aligned with its growth and production forecasts.
"This is a strategic and economic reset. It supports the Camperdown acquisition and investment rationale and fundamentally realigns incentives with Fonterra for future growth,” Bellamy’s chief executive Andrew Cohen in the statement.
Shares in Bellamy’s closed on Friday at $5.76.
The raising will be done via a 5 for 38 pro rata accelerated non-renounceable entitlement offer at a price of $4.75 per share. The offer is fully underwritten.
