Wellard will sell its livestock vessel M/V Ocean Outback, which can carry 6,000 cattle or 25,000 sheep, to Israeli poultry processor Dabbah Slaughterhouse Limited.
The deal is still subject to regulatory approval from the Norwegian Shipbrokers’ Association, but will be completed in the first quarter of 2018 as a binding agreement to sell the ship has been signed. The sale will net Wellard AU$34m (US$26m), although small cash changes could be made between now and 2018.
Sale of the large livestock carrier comes as Wellard CEO Mauro Balzarini said the business faced “very difficult trading conditions” and expected to post “trading losses” this year.
Low cattle numbers in Australia have led to an increase in livestock prices, denting Wellard’s profitability. The sale of M/V Ocean Outback will help reduce debt by AU$16.3m ($12.1m).
A company-wide review is under way to assess the value of its assets – which includes five large livestock vessels, dozens of sheep and cattle farms and a feed mill. Balzarini said this review might result in asset “impairments” although the extent of the financial losses is not yet clear.
“The quantum of such losses is yet to be determined as the year is not complete,” said Balzarini.
“Notwithstanding the very tough year, we are managing our way through… the sale of the M/V Ocean Outback leaves Wellard with an improved liquidity position. The market signals for the beginning of the new financial year FY2018 are more promising than FY2017, which leads us to expect some improvement in performance in FY2018.”
The business has embarked on a capital-raising initiative to generate AU$52m ($38m) in order to restore depleted cash reserves.
In May, the business appointed Kanda Lu – a key figure from Wellard’s major Chinese shareholder Fulida Group – as executive director in a push to expand in China’s cattle market.