ASX Announcement

Wellard Ltd (Wellard, ASX:WLD) advises that it recorded its best full year Earnings Before Interest Tax Depreciation and Amortisation (EBITDA) result of $23.3 million in FY2020, as the Company began to realise the benefits of its debt restructure program to record its first full year financial profit since listing on the ASX.

It was a modest Net Profit After Tax (NPAT) of $0.2 million, but combined with almost doubling EBITDA, reducing net debt by around $103m or 92% year on year and still retaining $16.8 million cash at hand at financial year end, the Company is in a vastly superior financial position than it was 12 months ago, Wellard Executive Chairman John Klepec said.

“The changes we have made to Wellard’s debt structure, operating base and business strategy have begun to yield results,” he said.

“While we would have preferred a higher NPAT, it was a good result given the global COVID-19 disruptions during the second half. More importantly it demonstrates a positive trend over the last three years, and we are heading in the right direction. With low net debt, a healthy cash balance, reduced cost base and a reasonable order book of charter activity in the near term, the Company has started FY2021 in a robust financial position.

“We have completed our balance sheet restructure to provide the Company with greater financial resilience, and I’m pleased to say this is the first set of financial results since listing where Wellard is in full compliance with all of its financial covenants.”

Profit and Loss

In line with Company’s move to scale back exporter/trader activity to focus on a livestock vessel charter business, revenue declined from $235.1m to $87.6m.
There was a corresponding reduction in gross profit, but, importantly, Wellard’s gross profit margin almost doubled from 16.5% to 31.8% with the transition in business activity.

Wellard’s key financial metrics continue to move in the right direction, Mr Klepec said.

EBITDA grew from $9.8m in FY2018 to $12m in FY2019 to $23.3m in FY2020. Similarly, NPAT has improved from a $36.4m loss in FY2018, a $48.4m loss in FY2019 to a $0.3m profit in FY2020.

The FY2020 result was aided by a further halving in operational and administration expenses as part of the cost savings that we continue to identify and implement.

“We are getting greater stability into our earnings and with the balance sheet restructure now completed, our interest bill has been reduced considerably. This is already enabling better conversion of revenue into profit for shareholders” Mr Klepec said.

“Our fleet is now right sized for the current market conditions, so although the fleet is smaller the company is more financially resilient with a more robust balance sheet and better fleet utilisation.

This places us in a good position to capture sustainable growth opportunities.”

“Importantly our cost reductions have not come at the expense of animal welfare outcomes and ongoing maintenance of the fleet, with management focussed on both these key success indicators.”

Balance sheet

Wellard continued with asset sales in H2 FY2020 as part of its balance sheet restructure, completing the sale of M/V Ocean Shearer for US$53.0 million.

Combined with the earlier the sale and leaseback of the M/V Ocean Swagman in H1 FY2020, Wellard used the proceeds to pay off both ship debt and corporate noteholders to reduce the Company’s net debt from $111.8 million on 30 June 2019 and $84.5 million on 31 December 2019 to just $8.9 million on 30 June 2020.

Nearly all the debt is now shipping finance and the ship loan to asset book value ratio has improved from 61.9% a year ago to 37.6% at the end of the reporting period.

Wellard is in full compliance of all financial covenants, the first time since listing on the ASX.

Coronavirus impact

COVID-19 has had some impact on the costs side of Wellard’s business, however demand for its vessels has remained largely, but not totally, unaffected.

The biggest impact on the Company’s operations has been the restricted ability to undertake crew changes and longer berth times at each port of call as countries adopted new procedures.

We have only recently been able to divert our vessels to ports where some crew changes could be achieved, increasing ballast voyage sailing times which has both a direct and an opportunity cost to the Company.

Only one voyage experienced a direct demand-related COVID-19 impact, when two charterers on a multi-charter voyage to Indonesia materially reduced the area chartered at late notice due to an importing customer issue related to COVID-19. No other charters have been directly impacted in this manner. Management of all regulatory changes and logistical demands resulting from the COVID-19 pandemic certainly add to the difficulty of negotiating, securing and delivering the
ongoing chartering of our fleet.

Outlook

The current outlook for H1 FY2021 is good with all available tonnage chartered (noting the M/V Ocean Ute has commenced six weeks of planned drydock in August) for the first quarter and a good pipeline of both confirmed charters and opportunities for the second quarter.

Chinese demand for Australian and New Zealand dairy and beef breeding cattle was a large contributor to Wellard’s vessels’ activity in FY2020 and shows no signs of slowing in FY2021. Wellard therefore expects to continue to charter our vessels to service that market.

In addition, the M/V Ocean Swagman is close to completing a successful charter from Chile to China with very good results, so transporting breeding stock from South America to China is a potential new market opportunity.

There is less certainty in FY2021 about Wellard’s two other core markets – Australian feeder cattle to Indonesia and Australian slaughter cattle to Vietnam. Throughout 2019 the prolonged drought in Australia kept supply high and cattle prices competitive with alternative proteins in importing markets.

The underlying demand for beef protein in these destination markets and others in the region remains high, including because African Swine Fever continues to negatively impact pork supply.

In 2020 Australian cattle prices started to rise, and at present are the highest in the world, presenting challenges for exporters servicing the Indonesia and Vietnam markets as they seek to compete with alternative proteins.

The Australian cattle trade to Indonesia and Vietnam remains important to Wellard. Despite expected high cattle prices remaining in FY2021 as the herd rebuild continues after drought, placing downward pressure on the volumes exported, there will still be a volume of cattle shipped albeit at lower volumes than previous years. Wellard has established a strong position in this market and is intent on defending and even growing that position.

The key South America to Turkey trade continues to remain uncertain, with import permits for small shiploads of cattle being released at present. If Turkey starts to release more import permits and for larger numbers, the M/V Ocean Drover could be deployed from its Australian base to that trade.

With this trade currently operating at a trickle, and Australia’s annual northern hemisphere summer live export suspension in force, most large vessels in the global livestock fleet have been at anchor awaiting the issuing of Turkey import permits. Until the idle shipping capacity is utilised in the market there is no likelihood of any improvement on ship charter rates in FY2021.

“There are both opportunities and challenges ahead for Wellard. We are however in the fortunate position that Wellard’s vessels are the ships of choice when exporters and importers need medium or large livestock carriers. Our balance sheet is robust, and our cash position is strong,” Mr Klepec said.

Animal welfare and government regulation

Under Wellard’s charter-focussed business model, the Company continues to ensure that every animal in our care is managed to the highest animal welfare standards. Given our larger than average, largely purpose-built vessels, our expert crew, and our rigorous emphasis on high standards of care, we continue to demonstrate that we can provide superior conditions for the transport of livestock to destination markets.

No reportable mortality voyages or Exporter Supply Chain Assurance System (ESCAS) breaches (from previously exported cattle) were recorded by Wellard during the current reporting period.

Wellard continues to support sensible and sustainable Australian regulations which move the industry away from mortality as the sole indicator of onboard animal welfare to alternative indicators.

Mortality does however remain an important animal welfare indicator and during the current financial year Wellard fleet reported one of the highest success delivery rates in its history:

• Of the 335,250 head of cattle loaded during the period, our vessels delivered 334,882 cattle, recording a success rate of 99.9%; and
• Of the 95,360 sheep loaded during the period, our vessels delivered 95,164 sheep, recording a success rate of 99.8%.

Regulatory and legal update

The Federal Court of Australia recently ruled in favour of class action plaintiffs in legal action against then Federal Agriculture Minister Joe Ludwig’s decision to ban the live export of cattle to Indonesia in 2011.

Wellard is a member of the class and was the largest cattle exporter to Indonesia at the time. At this stage it is unclear what the quantum of damages awarded to the class of plaintiffs might be or when any payments would occur.

Wellard has lodged its defence in response to a class action launched against the Company (see ASX announcement 10 March 2020).

The Company has been asked by a number of shareholders whether it possesses Directors and Officers (D&O) liability insurance. The specific arrangements Wellard has with its insurers are confidential, however, as would be expected of a listed public company, Wellard has various insurances in place to deal with a variety of risks and the Company would be expected to give ongoing consideration to its entitlements under any potentially relevant insurance.

Transition to US$ reporting

The Board of Wellard Ltd has agreed that Wellard will report its future financial results in $US, including its 1H FY2021 accounts.

The completion of Wellard’s strategic move from livestock trading to livestock logistics services and the consequent refocus on the chartering activity of its Singapore-based subsidiaries means nearly all of the Group’s revenue and expenses are conducted in US Dollars.

The Board has therefore decided to change the Group’s presentation currency of its financial information from the Australian Dollar to the United States Dollar with effect from 1 July 2020. This annual report will be the last report presented in Australian Dollars.

The Board believes that the change in the reporting currency will provide shareholders with a more accurate reflection of Wellard Limited’s underlying performance while reducing the impact of currency fluctuations.

At the release of the FY2021 interim and full year financial results, the FY2020 accounts will be restated in USD to provide shareholders with meaningful comparisons with the prior corresponding period.

Wellard’s FY2020 Annual Report including Results for Announcement to the Market; Directors’ Report, Remuneration Report and Audited Financial Statements are also released to ASX on 27 August 2020.

This ASX release was approved by the Wellard Board of Directors.

For further information:

Investors
Wellard Limited
Executive Chairman, John Klepec
Phone: + 61 8 9432 2800

Media
FTI Consulting
Cameron Morse
Phone: + 61 8 9485 8888
Mobile: +61 (0) 433 886 871

ASX Announcement

Highlights

• Sale of MV Ocean Shearer completed for US$53.0 million (approx. A$89.8 million¹) to reduce Wellard financial debt² to US$16.9 (approx. A$28.7 million);
• US$40.8 million (approx. A$69.1 million) reduction in existing debt;
• US$12.2 million (approx. A$20.7 million) increase in cash on hand;
• Wellard’s fleet right-sized to three vessels;
• Successful sale transaction will complete company recapitalisation without further shareholder dilution, providing greater financial flexibility.

Wellard Limited (ASX:WLD) (Wellard or the Company) is pleased to announce that it has completed the sale of its vessel, the MV Ocean Shearer, for US$53.0 million, completing the Company’s recapitalisation program and strengthening the Company’s working capital position.

The recent devaluation of the Australian dollar has the increased the $A amount received from the sale by A$12.0 million from $A77.8 million at the time the term sheet was signed (see ASX announcement 12 December 2019) to approximately A$89.8m at today’s exchange rate.

While this does not impact the Company’s debt repayments, which are also in US$, it does significantly increase the A$ value of the cash retained from the sale.

Wellard paid approximately US$40.8 million (approx. A$69.1 million) of the sale proceeds to reduce the Company’s financial debt to just US$16.9 million (approx. A$28.7 million), a level more appropriate to current activities and market conditions. The remaining US$12.2 million (approx. A$20.7 million) will be retained as cash for operations.

The Company will focus exclusively on maximising earnings and profits from the MV Ocean Drover and MV Ocean Ute, and the long-term chartered MV Ocean Swagman, said Wellard Executive Chairman John Klepec.

“The sale of the MV Ocean Shearer reduces Wellard’s debt to very manageable levels, crystallises value from an under-utilised vessel in our fleet, and significantly de-risks the business providing working capital for the Company in the present circumstances,” Mr Klepec said.

“We are noticing that countries with food security concerns or fresh meat requirements are becoming increasingly reliant and/or focussed on livestock imports as global airlines shut down operations, delaying imports of chilled meat.

“While COVID-19 travel restrictions are creating some logistics issues with respect to stockmen/women, crew and veterinarians, we have been able to manage these to date. At present, all of our fleet are in demand by Australian exporters.”

From the funds received, Wellard will pay out the remaining associated vessel finance to Intesa Sanpaolo Bank S.p.A. (“Intesa”) and pay out in full the debt owed to noteholders.

Funds will be directed to the following:

• US$36.9 million (approx. A$62.5 million) to full repayment of vessel finance to Intesa;
• US$3.9 million (approx. A$6.6 million) to full repayment of debt to noteholders; and
• US$12.2 million (approx. A$20.7 million) minus transaction costs, will be retained as Wellard cash reserves and working capital.

The reduction in debt will reduce Wellard’s annual principal and interest costs by approx. US$8 million (approx. A$13.6 million).

Subsequent impacts

In discharging the Intesa loan, the remaining “key-man” restrictions relating to the Balzarini family will also cease to exist. Accordingly, parties owned or controlled by former Wellard CEO Mr. Mauro Balzarini will no longer be required to hold a minimum 12.5% shareholding in Wellard Limited. Wellard has been advised that when this restriction is lifted, creditors associated with Mr. Balzarini’s private interests will take possession of the majority of those previously restricted shares. Wellard has no influence over the timing and execution of that transfer, and an appropriate announcement will be made in due course.

For further information:
FTI Consulting, Cameron Morse
Phone: + 61 8 9321 8533
Mobile: + 61 (0) 433 886 871

¹ US$/A$ exchange rate of 1.6941 as at 26 March 2020
² Financial Debt includes future non-cancellable lease obligations

ASX Announcement

Wellard Limited (Wellard) has today been served with a class action proceeding filed in the Federal Court of Australia in Victoria.

The proceeding filed by Quinn Emanuel Urquhart & Sullivan is on behalf of all persons who or which:

1. acquired an interest:
   1. in ordinary shares in Wellard between 8 December 2015 and 31 August 2016; and/or
   2. in a long exposure to shares in Wellard by entering into equity swap confirmations in respect of the shares between 8 December 2015 and 31 August 2016; and
2. have, as at 9 March 2020, entered into a litigation funding agreement with ICP Funding Pty Ltd.

Wellard intends to vigorously defend this claim.

This announcement has been authorised for release to the market by the Wellard Board of Directors.

For further information:

Investors
Executive Chairman, John Klepec
Phone: + 61 8 9432 2800

Media
FTI Consulting, Cameron Morse
Phone: + 61 8 9485 8888
Mobile: +61 (0) 433 886 871

ASX Announcement

Highlights

• Sale of MV Ocean Shearer for US$53.0 million (approx. A$77.8 million¹) to reduce Wellard financial debt to US$16.7 (approx. A$24.6 million)²;
• US$42.3 million (approx. A$62.0 million) reduction in existing debt;
• US$10.7 million (approx. A$15.8 million) increase in cash on hand;
• Wellard’s fleet right-sized to three vessels (two owned and one exclusively leased);
• Successful sale transaction will complete Company recapitalisation without further shareholder dilution, providing greater financial flexibility.

Wellard Limited (ASX:WLD) (Wellard or the Company) is pleased to announce that it has signed a Term Sheet to sell the MV Ocean Shearer for US$53.0 million, which would complete the Company’s recapitalisation program on successful closure of the transaction.

Wellard intends to apply approximately US$42.3 million (approx. A$62.0 million) of the sale proceeds to reducing the Company’s financial debt to just US$16.7 million (approx. A$24.6 million), a level more appropriate to current activities and market conditions. The remaining US$10.7 million (approx. A$15.8 million) will be retained as cash for operations, significantly strengthening Wellard’s working capital position.

The Company can now focus exclusively on maximising earnings and profits from the company-owned MV Ocean Drover and MV Ocean Ute, and the long-term chartered MV Ocean Swagman.
Wellard is selling the MV Ocean Shearer to Livestock Transport & Trading Co KSC, Kuwait, a company controlled by Al Mawashi Limited, a Kuwaiti publicly listed company, which trades in Australia as Kuwait Livestock Transport and Trading Company (“KLTT”) and which, among other activities, is one of the largest exporters of sheep from Australia to the Middle East.

The vessel, which was delivered in 2016, is the world’s largest purpose-built livestock vessel.

“The sale of the MV Ocean Shearer cuts Wellard’s financial debt to very manageable levels while crystallising value from an under-utilised vessel in our fleet,” Wellard Executive Chairman John Klepec said.

The sale is subject to final documentation under the Norwegian Shipbrokers’ Association’s Memorandum of Agreement for Sale and Purchase of Ships (BIMCO Form Rev, 2012), which provides standard terms and conditions adopted internationally for sale of oceangoing ships, and is subject to standard conditions precedent including final vessel inspections. The mortgage to Intesa Sanpaolo Bank S.p.A. (“Intesa”) will be paid out and discharged. The transaction is anticipated to complete no later than end-March 2020.

The principal terms of the transaction are attached.

Wellard’s Board will proceed with the transaction in absence of a superior offer.

Funds will be directed to the following:

• US$38.4 million (approx. A$56.3 million) full repayment of vessel finance to Intesa;
• US$3.9 million (approx. A$5.7 million) full repayment of debt to noteholders; and
• US$10.7 million (approx. A$15.8 million) minus transaction costs, will be retained as Wellard cash reserves and working capital.

The agreed price is slightly higher than the consolidated net book value of the vessel and the vessel will be treated as an asset held for sale when the Company’s interim accounts are lodged in February 2020.

Mr Klepec said that Wellard was paying approx. US$8 million (approx. A$11.7 million) in principal and interest costs on the MV Ocean Shearer annually, in addition to various other fixed costs such as maintenance and crewing.

“Given our comparable sized vessel, the MV Ocean Drover has completed three times the number of voyages as the MV Ocean Shearer in 2019, it makes financial sense to release value and reduce debt from an under-utilised asset, adding A$15.8 million to our cash reserves and reducing our annual debt servicing by US$8 million,” he said.

Wellard’s Executive Chairman, Mr John Klepec said Wellard’s high debt load, which had become a millstone around its neck, would be consigned to history on the successful settlement of the transaction.

“Wellard can now focus on charter utilisation and running its vessels efficiently. Our Company has changed its approach and has become an international livestock logistics business, with more robust systems and processes, best-in-class animal welfare outcomes, a leaner overhead structure, and a more reliable revenue stream from its highly specialised charter operations.

“The Ocean Shearer has been the biggest vessel in our fleet, but it has been consistently underutilised in the current very volatile environment. It has been predominantly deployed in the South America-Turkey trade route, which has twice been closed suddenly, leaving Wellard with fixed financing and overhead costs but without revenues.

“KLTT’s purchase offer of US$53.0 million (approx. A$77.8 million) represents a significant de-risking of Wellard’s business, and allows the Company to concentrate on the three remaining more economically attractive vessels, being the Ocean Drover, the Ocean Ute and the Ocean Swagman.

“KLTT will deploy the Ocean Shearer to the Australia–Middle East trade route, which I am pleased to note will likely be an ongoing benefit to Western Australian farmers and other businesses in the related supply-chain. Wellard certainly wishes KLTT every success in their ownership and operation of this very impressive vessel.”

Subsequent impacts

In discharging the Intesa loan, the remaining “key-man” restrictions relating to the Balzarini family will also cease to exist. Accordingly, parties owned or controlled by former Wellard CEO Mr. Mauro Balzarini will no longer be required to hold a minimum 12.5% shareholding in Wellard Limited. Wellard has been advised that when this restriction is lifted, creditors associated with Mr. Balzarini’s private interests will take possession of the majority of those previously restricted shares. Wellard has no influence over the timing and execution of that transfer, and an appropriate announcement will be made in due course.

Shareholder approval not required

The transaction does not represent a substantial change in Wellard’s principal activities.

ASX has advised that it will not exercise its discretion under Chapter 11 (Significant Transactions), and therefore Wellard’s shareholders are not required to approve this transaction.

This ASX announcement was approved by Wellard’s Executive Chairman, Mr. John Klepec.

For further information:

Investors
Executive Chairman, John Klepec
Phone: + 61 8 9432 2800

Media
FTI Consulting, Cameron Morse
Phone: + 61 8 9321 8533
Mobile: + 61 (0) 433 886 871

¹ US$/A$ exchange rate of 1.4678 as at 11 December 2019

² Financial Debt includes future non-cancellable lease obligations

ASX Announcement

Welcome

I would like to welcome shareholders to the 2019 Wellard AGM, my second as Executive Chairman of the Company.

As with last year, I will provide a brief chairman’s address before providing more detailed information about the operations and finances of the Company in my executive capacity, alongside the Company’s Chief Financial Officer John Stevenson.

Recap of FY 2019

Looking back on Wellard’s FY2019 results, and it was a tale of two halves.

When I stood here in November 2018 Wellard was on track to – and ultimately did – record the first half year profit in the Company’s history, aided by strong shipping utilisation and a healthy trading environment.

But fortunes changed for the Company on Christmas Eve 2018, when, for domestic and political reasons, the Turkish Government closed its borders to live cattle imports.

For the previous six months one of our two long haul vessels, the MV Ocean Shearer, had been chartered to undertake back to back voyages from South America to Turkey. As a result of the decision by Turkey to suspend exports, that vessel spent the next eight months without a charter.

The Turkish live cattle closure plus the decrease in sheep shipments from Australia led to an oversupply of livestock shipping capacity, impacting utilisation of our other large long-haul vessel, the MV Ocean Drover, and driving down charter rates.

Vessel utilisation has a significant impact on our financial results, so the non-utilisation of the Shearer and the under-utilisation of the Drover, combined with some other issues such as impairing the carrying values of our vessels, caused Wellard to record a net loss after tax of $48.4 million for FY2019.

This was clearly a disappointing result, particularly after our strong first six months.

As I noted in our annual report, and without seeking to downplay the overall profit result, there were some promising signs contained within the Company’s FY2019 results.

Our EBITDA increased by more than $2.0 million to $12.0 million (FY2018: $9.8 million), and we converted that EBITDA into $29.8 million of operating cashflow compared to last year’s EBITDA of $9.8 million converting into $7.7 million of operating cashflow.

We stripped another $2.2 million from our continuing operational and administration expenses, and expect further reductions in FY2020.

In the 2019 financial year the Company’s balance sheet received considerable management attention.

Clearly, the Company’s debt levels were too high. The quantum and short-term variability in our earnings simply could not support the longer-term debt levels and their servicing requirements, particularly when there were trade interruptions. The debt repayment profile – in particular the repayments to noteholders and two balloon repayments that were due on the MV Ocean Drover and MV Ocean Ute in the first half of FY2020 – a total of approximately $50 million – needed to be successfully resolved to continue operating.

At our 2018 AGM I spoke about the planned monetisation of non-core assets.

In the past 12 months we have:

• completed the sale of those non-core assets such as the Beaufort River Meats abattoir, our Feed Mill, our Feed Lots , our Victorian Pre-Export Quarantine facility, and our planned development in China;
• sold the MV Ocean Swagman with a three-year bareboat charter leaseback with the potential to extend; and
• extended the balloon repayments on the Ocean Drover and Ocean Ute for two years to December 2021.

So, we have achieved what was required under difficult market conditions. Total liabilities reduced from $194 million on 30 June 2018 to $143 million by 30 June 2019, and we are working hard to reduce this debt burden even further.

There is always more to be done. Debt reduction will continue to be a core focus of the business so that Wellard emerges from this restructure with a sustainable financial foundation.

Outlook

Looking forward into FY2020 – the first 5 months of the current financial year have certainly been a vast improvement on the first 5 months of the 2019 calendar year.

Three out of four vessels have been fully utilised since 1 July, and the Ocean Shearer has just completed its second voyage to Turkey since that market resumed trading.

Whether those utilisation levels will continue is uncertain as the market is reluctant to buy forward with expectations of sufficient supply being available. In an environment focussed on delivering low risk positive animal welfare outcomes, together with regulatory improvements in Australian shipping standards, the Wellard fleet is well placed to capitalise on demand improvements.

It is our view that export sheep and cattle prices in Australia are close to being ‘fully priced’ in that if they go too much higher, then livestock importers and exporters of Australian livestock will struggle to compete with competing supply and proteins, which will impact on the vessel charter market.

Forward focus

Wellard is now exclusively a chartering company. The last animal that boarded one of our vessels with Wellard as the licensed exporter was in June 2019.

Our focus is therefore on making sure that we are as lean as possible so that Wellard vessels are cost-effective in the chartering market, a market which already recognises the strong performance
of our vessels with respect to weight gain and animal welfare.

We don’t see this changing in the short-term. It reduces our working capital requirements; has improved vessel demand as other exporters no longer view Wellard as a competitor but as a key supplier; and has improved our ability to say “no” to loss-making transactions we previously entered into purely to keep a long-term import customer on our books.

Animal Welfare

Although we have moved to become a dedicated chartering company, we have not wavered in our focus on animal welfare.

Good animal welfare is core to Wellard. We invest in our people, our processes and our infrastructure to ensure that the best possible animal welfare outcomes are achieved.

The live export industry is moving away from mortality as the primary indicator of animal welfare to other indicators. While those indicators are being developed, mortality rates remain the yardstick, and I’m pleased to provide you with the following statistics that demonstrate the performance of our vessels.

• Of the 118,097 cattle traded by Wellard and loaded onto 18 voyages in FY2019, the Group recorded a mortality rate of 0.08% or 97 head in total.
• On our trading voyages of 7,000 loaded cattle or less, mortalities were on average three head per voyage.
• For our trading voyages of around 19,000 loaded cattle, mortalities were on average 16 head per voyage

These are outstanding results.

People & Remuneration

Finally, let me turn to discuss people and remuneration. At our 2018 Annual General Meeting, Wellard received a ‘first strike’ vote against its FY2018 Remuneration Report. While noting that Wellard needs to retain, attract and incentivise staff who will improve the financial performance of the Company, the Board has made several changes to its remuneration structure.

Prior to FY2019, all short-term incentives for the Group were discretionary. During FY2019 a formal Short-Term Incentive Plan (STIP) was implemented for executives and senior managers based-on individual Key Performance Indicators (KPI’s), outcomes and added shareholder value.

The Board does retain the ability to award discretionary payments. Importantly, baseline KPI’s must be met for the recipient to be eligible for the stretch bonus available under the STIP.

As part of our restructuring process Mr. John Stevenson reviewed our finance and administration structure concluding that these should be consolidated within our in Singapore office. With that consolidation of functions now completed and the scope of role changed due to the chartering focus, John Stevenson has stepped back from the CFO role effective from today. I am pleased to say that John will remain on Wellard’s Board as a non-executive Director. I am also pleased that our very long serving and experienced Singapore Managing Director, Mr. Paolo Triglia will take on the Group’s CFO responsibilities. On behalf of the Board, I thank John Stevenson for the exceptional work he has done, particularly in restructuring Wellard’s banking and debt positions in the past two years, which will serve as a platform for us to move forward.

Due to the restructure of our business, the Group’s future remuneration costs will drop significantly, with FY2020 reflecting the more focussed business and streamlined management team.

Conclusion

In closing, it would be remiss of me not to mention that Australia’s largest livestock vessel owner and exporter, Wellard, is celebrating its 40-year anniversary.

The Company’s first shipment – a cargo of 17,000 sheep aboard the El Podrero to Libya – set sail in late September 1979, arriving approximately three weeks later.

Wellard has continually evolved in its 40 years of operations. Originally a family-run company, and later as a public company, Wellard grew to become one of Australia’s largest sheep exporters,
pioneered large cattle consignments to South East Asia and built and operated purpose-built livestock vessels designed to enhance animal welfare.

The Company continues to evolve until this day, and although we have had to overcome adversity along the way, I look forward to Wellard solidifying its position to provide a platform for future
growth given the growing global demand for protein.

I would like to thank our shareholders for their continued support and all of Wellard’s people, including those that we said goodbye to in the past year as a result of our changed business model.
And I would like to thank the Board. In an ongoing challenging environment, each member is fully committed to turning around Wellard’s fortunes so that we emerge as a more financially sustainable company.

JOHN KLEPEC
EXECUTIVE CHAIRMAN
WELLARD LIMITED

ASX Announcement

Wellard Ltd (Wellard, ASX:WLD) advises that shareholders have voted this morning to approve the sale for US$22M, and lease back of the livestock vessel the MV Ocean Swagman to Heytesbury
Singapore Pte Ltd, a subsidiary of Heytesbury Holdings Company Pty Ltd.

73.40% of votes cast in person or by proxy were in favour of the resolution.

Full details of the final voting results are attached (view original announcement here.)

For further information:

Investors
Executive Chairman, John Klepec
Phone: + 61 8 9432 2800

Media
FTI Consulting, Cameron Morse
Phone: + 61 8 9321 8533
Mobile: +61 (0) 433 886 871

ASX Announcement

Wellard Limited (ASX:WLD) (Wellard or the Company) advises that it will proceed with the sale of the M/V Ocean Swagman to Heytesbury Holding Company Pty Ltd (Heytesbury) for US$22M.

The transaction also includes a bareboat charter of the vessel back from Heytesbury to Wellard immediately upon completion of the sale which is expected to complete on or before 30 September.

The approval of the board of Trim Shipping SA, a subsidiary of Nova Marine Carriers SA of Lugano, Switzerland (Nova), was not received by the deadline of 19 August 2019, and accordingly that condition precedent for a sale to Nova for US$25.2M has not been fulfilled.

Wellard has been working productively with Heytesbury to complete the necessary documentation, and expects to agree terms for the Memorandum of Agreement for the vessel sale, and the Bareboat Charter in coming days.

Heytesbury has confirmed conditions precedent, including financing, due diligence, and vessel inspection have all been achieved.

Remaining conditions include finalising a satisfactory standstill with Wellard’s noteholders, Wellard shareholder approval of the sale and lease-back (see below), bank consents, key shareholder support and meeting Singapore law requirements.

As previously advised, Heytesbury is a 11.42% shareholder of Wellard and is therefore a related party. Wellard will now prepare and lodge a Notice of Shareholder Meeting at which it will seek approval for the Heytesbury transactions. An Independent Expert’s report is being finalised and will be included in the Notice of Meeting.

Shareholders and the market will receive the Notice of Meeting in due course.

Details of the Heytesbury transaction were announced to the market on 4 July 2019, and details of the Trim / Nova transaction were announced to the market on 6 August 2019.

For further information:

Investors
Executive Chairman, John Klepec
Phone: + 61 8 9432 2800

Media
FTI Consulting, Cameron Morse
Phone: + 61 8 9321 8533
Mobile: + 61 (0) 433 886 871

ASX Announcement

Wellard Limited (ASX:WLD) (Wellard or the Company) advises that it has reached a conditional agreement with Ruchira Ships Limited (Ruchira) to extend by 24-28 months the repayment schedules for the M/V Ocean Ute (Ocean Ute) and M/V Ocean Drover (Ocean Drover) until December 2021. Ruchira effectively provides vessel finance on each of these vessels through a sale and leaseback contract. If the agreement becomes unconditional (on Ruchira obtaining board approval), there will no longer be near-term balloon payments due in the first half of FY2020 on the bareboat charter arrangements for these vessels. A standstill arrangement which includes a waiver of existing defaults has also been reached with Ruchira.

KEY POINTS

• Under the new arrangements with Ruchira, approx. A$20M originally due to be paid between now and December 2019, has been rescheduled for repayment over an additional 24-28 months;
• Both Ruchira and the noteholders will waive all existing covenant breaches, further improving Wellard’s compliance profile;
• The Company’s ongoing financial restructure is further advanced, with lower monthly repayment obligations and improved cashflow.

Wellard Executive Chairman, Mr. John Klepec said “Wellard is pleased to have had the ongoing cooperation of Ruchira to achieve these arrangements. They represent further evidence of progress in our financial restructure, and provide a clear path forward for the company.”

“Immediate and significant cash flow benefits will result from lowering the amortisation payments and deferring until December 2021 the requirement to buy back the M/V Ocean Drover and M/V Ocean Ute.”

The M/V Ocean Ute and M/V Ocean Drover are owned by Ruchira and leased back to Niuyang Express Pte Ltd (Niuyang P/L) and Ocean Drover Pte Ltd (Drover P/L) respectively, both of which are wholly owned Wellard subsidiaries.

For further information:

Investors
Executive Chairman, John Klepec
Phone: + 61 8 9432 2800

Media
FTI Consulting, Cameron Morse
Phone: + 61 8 9321 8533
Mobile: + 61 (0) 433 886 871

ASX Announcement

Wellard Limited (ASX:WLD) (Wellard or the Company) provides the following update regarding a transaction Term Sheet which it has signed as part of its overall strategy to recapitalise its business and restructure its operations, including its position with its Noteholders.

KEY ELEMENTS:

1. Sale of M/V Ocean Swagman:

• Heytesbury Holding Company Pty Ltd or its subsidiary (“Heytesbury”) will purchase the M/V Ocean Swagman (“Swagman”) for US$22M.
• Wellard will charter the vessel back from Heytesbury for an initial period to 31 March 2021, with options to extend for up to 4 years (1 year extension option on same terms, and further 3 years extension option at market rate to be agreed).
• Heytesbury holds 11.42% of Wellard.
• A break fee of US$300,000 or of US$600,000 may be payable in certain circumstances.
• Funds from the sale will be used primarily to retire debt.
• Conditions precedent include due diligence, vessel inspection, satisfactory standstill with Wellard’s Note Holders (see below), Wellard shareholder approval of the sale and lease-back, bank consents, key shareholder support and meeting Singapore law requirements.
• Wellard’s Board proposes to proceed with the transaction and recommend it to shareholders, in the absence of a superior transaction.
• Except for limited clauses (including break fee and exclusivity provisions) the term sheet is non-binding and the sale and charter is subject to documentation.

The Term Sheet for this transaction is attached.

2. Noteholder Standstill arrangement:

• Wellard’s Noteholders have agreed an indicative, non-binding term sheet for a further standstill period
• Noteholders will receive US$10M from the Swagman sale proceeds, which is anticipated to occur on 31 August 2019
• From 1 October 2019, Noteholders will receive US$200,000 per month and a balloon repayment on 31 August 2020 (if additional security can be provided) or US$400,000 per month and a balloon repayment on 28 February 2020 (if no additional security can be provided). All payments will redeem convertible notes.
• The standstill applies until 31 August 2019, subject to a right to extend for a further 15 days in circumstances where the Swagman sale is unconditional other than as to shareholder approval.
• Interest of 14% p.a. will apply during the standstill and repayment period.
• Wellard will pay US$100,000 in work fees, together with legal and advisory costs.
• The standstill is subject to financial due diligence, internal approvals, agreeing documentation between Wellard and the Noteholders, which is to be negotiated and signed simultaneously with the ship transaction documents, and on Noteholders being satisfied with Wellard’s medium term financial forecasts.

RESTRUCTURE PROGRESS

The sale and leaseback of the MV Ocean Swagman represents a further significant step in Wellard’s ongoing restructure plan to reduce debt levels and improve financial and operating flexibility. Importantly, Wellard retains management of and access to a fleet of four specialist livestock vessels while releasing significant equity without shareholder dilution.

When completed, the group’s overall debt will be reduced from approx. US$85M to approx. US$64.0M. It will reduce future finance servicing obligations, in turn improving Wellard’s cashflow.

The proceeds from the sale will be used to fully pay out the remaining US$6.0M Wellard owes to the vessel’s financier, Nord LB; US$10M will be paid to Convertible Noteholders; and the balance to other vessel financiers and transaction costs. The outstanding balance owed to the Note Holders will be US$5.5M. The M/V Ocean Swagman (launched 2009) is the sister ship of the M/V Ocean Outback (launched 2010), which was sold for US$26M in 2017. The Company will book an accounting loss on sale of approx. US$7.6M.

The Company will continue to address the need for further balance sheet restructure, and is actively considering all options to achieve that objective.

Wellard’s Executive Chairman, Mr John Klepec said the transaction reduces Wellard’s debt profile and provides additional time and ability to restructure the Company’s balance sheet.

“Heytesbury’s purchase of the M/V Ocean Swagman provides an attractive opportunity for Wellard to realise the equity value in the ship while retaining continued use of the vessel for chartering or exporting opportunities . Heytesbury has a deep understanding of the business, and we look forward to continuing our very productive working relationship.

“Wellard will now be able to reduce and retire debts. We will also pay out Nord LB.

“There is still more work to do on the balance sheet to get it to a level where it needs to be, and this remains a priority for the Company. The sale of the M/V Ocean Swagman and the ongoing cooperation of our Convertible Noteholders under the renewed standstill agreement will make additional restructure initiatives more attractive to investors.”

For further information:

Investors
Executive Chairman, John Klepec
Phone: + 61 8 9432 2800

Media
FTI Consulting, Cameron Morse
Phone: + 61 8 9321 8533
Mobile: + 61 (0) 433 886 871

ASX Announcement

Wellard Limited (ASX:WLD) (Wellard or the Company) provides the following update on its debt restructure.

As announced on 1 April 2019, Wellard agreed a standstill with its noteholders in respect of certain defaults existing under its notes. The standstill period was scheduled to end on 30 September 2019, and during the standstill period Wellard was to grant certain security to the noteholders. Wellard has not been able to grant security to the noteholders, so under the terms of the standstill agreement, the standstill period ended on 7 June 2019.

Because the standstill period has ended, the noteholders are again entitled under the terms of the note documentation to demand immediate repayment of their outstanding notes due to the defaults. The current outstanding principal amount of the notes is US$15,500,000.

The noteholders have reserved their rights, but they have said they will continue to negotiate in good faith with Wellard to achieve a mutually acceptable solution. The end of the standstill period has triggered an increase in the note interest rate to 21% per annum and an increase of the monthly redemption amounts to US$1,000,000, and Wellard will be discussing these with the noteholders.

Prior to signing of the standstill agreement, defaults on the notes constituted cross defaults under certain of Wellard’s other financing arrangements. This cross-default was remedied during the standstill period. The end of the standstill period places Wellard in a similar position with respect to the note defaults creating cross defaults. Wellard is communicating with its other financiers in respect of this situation.

Wellard remains up to date on all payments to its financiers.

The Board continues to actively consider its options, including any opportunities to restructure its balance sheet and/or sell a ship. However, it is not certain that any such opportunities will arise or be completed in the short term.

For further information:

Investors
Executive Chairman, John Klepec
Phone: + 61 8 9432 2800

Media
FTI Consulting, Cameron Morse
Phone: + 61 8 9485 8888
Mobile: + 61 (0) 433 886 871

ASX Announcement

Wellard Limited (ASX:WLD) (Wellard) wishes to advise that Mr. Mauro Balzarini has ceased to be a director of Wellard.

In accordance with Wellard’s constitution, Mr. Balzarini has ceased to be a director of Wellard and his office as director has automatically become vacant, due to his employment with the Wellard group now having ceased.

For further information:

Investors
Executive Chairman, John Klepec
Phone: + 61 8 9432 2800

Media
FTI Consulting, Cameron Morse
Phone: + 61 8 9321 8533
Mobile: + 61 (0) 433 886 871

ASX Announcement

Wellard Limited (ASX:WLD) (Wellard or the Company) announces today that Mr. Mauro Balzarini has ceased the role of Chief Executive Officer.

Wellard has negotiated the removal of certain “key man” clauses and their consequences contained in its vessel finance agreement with Intesa Sanpaolo S.p.A.

Therefore the cessation of Mr. Balzarini’s employment as CEO no longer triggers an immediate prepayment event under the Intesa facility, and it does not constitute a cross default or breach under any of the Company’s other financing arrangements.

The terms of Mr. Balzarini’s departure from Wellard are currently being finalised. At present, Mr. Balzarini remains a non-executive director of the Company.

Wellard Chairman John Klepec will continue in the role of Executive Chairman.

For further information:

Investors
Executive Chairman, John Klepec
Phone: + 61 8 9432 2800

Media
FTI Consulting, Cameron Morse
Phone: + 61 8 9485 8888
Mobile: + 61 (0) 433 886 871

ASX Announcement

Wellard Limited (ASX:WLD) (Wellard or the Company) provides the following progress update on its turnaround plan.

Asset Sales

Wellard has completed the sale of its Wongan Hills feed mill and Baldivis Pre-Export Quarantine lease on a going-concern basis to Ausvision Rural Services, a subsidiary of Livestock Shipping Services. It has also completed the sale of its Condah Pre-Export Quarantine facility in Victoria.

The Company has also contracted to sell its Beaufort River Meats (BRM) abattoir in Western Australia also to Ausvision Rural Services, after the counterparty to the original sales agreement defaulted on the sales contract. ¹ This transaction is expected to be completed by the end of April 2019. The Company has retained the deposit from the original contract.

A total of approximately $17.5 million in free cashflow (including the retained deposit, the realisation of working capital, and the sale of other related assets in relation to these properties) will be realised from these combined asset sales.

In the Company’s ASX announcement on 18 December 2018 it estimated that it would generate $13.0m worth of free cashflow, including $8.0m from its Beaufort River Meats abattoir. That amount did not include the sale of its Condah Pre-Export Quarantine facility in Victoria.

Extension of noteholder standstill period

On 18 December 2018 the Company advised shareholders that it had agreed to an early redemption of 3.5 million convertible notes, worth US$3.5 million, as part of a standstill agreement with its noteholders, and after reaching agreements for the sale of non-core assets.

Additional detail was provided in Wellard’s FY2019 interim report.² 

Wellard has negotiated an extension of the previous noteholder Standstill Period, to extend the expiry from 31 March 2019 to 30 September 2019. ³

This Second Standstill Period may be further extended beyond 30 September 2019 at the discretion of the noteholders.

During this Second Standstill Period Wellard has committed to:

• Redeem a minimum of US$500,000 worth of convertible notes per month.
• Pay a coupon rate of 14% per annum on the face value of their outstanding notes; The interest rate will increase if and when the Standstill Period is further extended.
• Grant certain security to the noteholders.

Further, the parties have agreed that the notes are no longer convertible into shares in the Company.

Certain of the breaches the subject of the standstill will remain outstanding at the end of the Second Standstill Period, and the noteholders will be entitled to take enforcement action in respect of those breaches from the end of the Second Standstill Period. If any new breach occurs during the Second Standstill Period (including a failure to grant the agreed security when required), the Second Standstill Period will cease, and the noteholders will be entitled to take action.

This Second Standstill extension is subject to the parties executing formal documentation This is expected to be completed during the course of today.

For further information:
Investors
Executive Chairman, John Klepec
Phone: + 61 8 9432 2800

Media
FTI Consulting, Cameron Morse
Phone: + 61 8 9321 8533
Mobile: + 61 (0) 433 886 871

¹ see: ASX announcements on 23 November 2018 and 18 December 2018 in respect of the original sale
² see: ASX announcements 14 February 2019
³ see: ASX announcement 18 December 2018

ASX Announcement

Wellard Limited (ASX:WLD) (Wellard or the Company) releases the address to be presented by the Chairman at the Company’s Annual General Meeting today at Manning Room, Level 3, Quest Fremantle, 8 Pakenham Street, Fremantle at 10.00am (WST).

Welcome to the 2018 Wellard AGM, my first as Chairman of the Company. My chairman’s address won’t be long this year. I will shortly be presenting further about the operations and finances of the Company, alongside the Company’s CFO John Stevenson.

Wellard’s FY2018 financial results were released three months ago, so are well known. It was a vastly superior result to the previous financial year, and that needs to be acknowledged, but they were still not at a level where the Company delivered sustainable satisfactory returns for shareholders from our valuable assets, and therefore were not acceptable to the board, management and staff.

The $36.0 million improvement to the Company’s EBITDA, which increased from a $26.1 million loss in FY2017 to earnings of $9.9 million for FY2018, was the most pleasing aspect of the results we posted, as it demonstrated the turnaround, which we are working hard on, is working.

We are conscious however that although Net Profit After Tax (NPAT) improved by $38.9 million on the $75.3 million loss in FY2017, we still recorded a loss of $36.4 million for the financial year. A net loss remains unacceptable to the Board and the Company is focusing and working to achieve a return to profit.

The biggest change we have made to the Company’s operations is to how our shipping and trading divisions operate, so one division doesn’t exist solely for the other and each is fully accountable for its own financial performance. Our shipping division now treats our trading division as another export customer. It has a clear business mandate to pursue the most profitable charters, whether they are to Wellard or another exporter. This sounds simple but has involved important and progressive cultural, organisational and systems changes, which are beginning to show good results.

Wellard’s trading focus has narrowed solely to Australian sourced feeder and slaughter cattle for South East Asia where Wellard has traditionally been a dominant player. Our breeding and dairy trading team continue to complete trades across the globe.

Our trading division will only trade when it is profitable to do so, unless there is a strategic imperative to do otherwise.

It is important to recognise that the market for Northern Australian cattle has very limited alternatives other than live export, and as such it is the live export traders who effectively set the pricing as the link between processors and producers. As with all commodity markets, prices often stay higher and lower for longer than the fundamentals support.

Wellard possesses a distinct competitive advantage in the livestock vessel charter market – the investment the Company has made in our modern, state of the art, purpose-built livestock carriers. Our vessels have developed a well-deserved reputation for performance and good animal welfare outcomes on long-haul routes, which creates demand from charterers.

As a result of our change in strategy, 70.0% of Wellard’s shipping capacity was chartered to third parties in FY2018, versus 15.6% in FY2017. This has continued with a higher percentage expected in FY2019, and I cannot see this changing given the expected continued strong Brazil to Turkey trade volumes, and the Indonesian market remaining flat in the face of entrenched Indian Buffalo sales and low Indonesian feedlot margins capped by government mandated beef sales pricing.

In the face of some strong challenges to live export operators in Australia, I would like to take this opportunity to talk about what we believe sets Wellard apart.
There are three core values that we are focussing on in our business:

1. Animal welfare

Animal welfare is at the heart of everything we do. Good animal welfare is core to Wellard. We invest in our people, our processes and our infrastructure to ensure that the best possible animal welfare outcomes are achieved.

We have one of the most modern fleet of livestock carriers in the world; we are active in seeking higher regulatory standards to improve animal welfare outcomes across the industry; we work with research organisations such as universities on R&D projects; we provide training in-market to our customers’ staff; and animal welfare is an important component of our new staff induction process.

These are just a few of the actions that reflect our animal welfare ethos. We are walking the animal welfare walk, not just talking the talk.

In making this investment, it was interesting to note a thought-provoking article on Beef Central in the middle of this year which posed the question: If producers sell on price alone, can they expect good livex outcomes?

The premise of the article is that there is a cost to providing best practice standards, whether they be shipping or in-market, as opposed to meeting the minimum standards or even less.

Maintaining our social licence to operate is the single highest risk we have in our Australian operations. As a company that invests in modern vessels, additional comforts for the animals on board and greater selectivity about who we do business with in-market, we are challenged by a higher cost base.

However, if producers insist on making their selling decisions on price alone, without any reference to an exporter’s substantial investment in superior quality shipping infrastructure and ESCAS records, then there is no reward to the exporter for that investment.

In fact, it can easily be argued that the producers are complicit in undermining the long-term sustainability of the live export trade by preferencing short-term and often minimal gains.

Wellard’s view is that to make Australian live exports sustainable into the future, producers will need to take a longer-term view of their pricing, and help shoulder the real costs of good animal welfare outcomes, about which both good producers and good exporters care a great deal.

Government has a significant role to play by setting and enforcing standards, and of course exporters themselves need to operate in a manner that is consistent with Australian community expectations.

Wellard has not been active in the live sheep export trade for some years as we could not compete commercially. The trade has seen unacceptable outcomes in certain limited cases. Both the live export industry’s lack of adequate self-regulation and government’s regulatory processes have allowed this to occur.

It is now the pressing responsibility of all involved in the live cattle trade to complete the cultural change that is required to ensure that the live cattle trade’s social licence to operate is retained, and that the industry rebuilds its reputation as an important economic and social contributor to both Australia and to the international markets which we serve.

2. Entrepreneurship

Our second core value is Entrepreneurship. Our history is steeped in entrepreneurial endeavours and we foster the same spirit in all our people who act with professionalism, safety and take personal ownership of everything they do.

3. Simplicity

And our third value is simplicity, which may seem obvious but is often difficult to achieve in today’s complex operating environment. We aim to source and move livestock for our customers efficiently, maintaining at all times a focus on excellence, continuous improvement and sustainability.

In Wellard’s original IPO prospectus we noted that we were intent on developing a Secured Sourcing model. The strategic intent remains, and although we have been focussed on some nearer term issues that required management attention, we have continued to develop this model.

We have recently entered into a MOU with Elders Rural Services Australia Ltd for the procurement of Australian cattle commencing in 2019 that we believe will provide greater certainty for our suppliers, our customers and our Company.

Continuing on the theme of simplicity, Wellard’s Beaufort River Meats abattoir has been identified as a non-core asset, sitting off to the side of our larger trading and shipping business.

After receiving a reasonable offer to purchase this asset, Wellard has recently reached agreement on key terms and is currently finalising a contract for its sale to International Meats Pty Ltd.

This sale is expected to complete in February 2019, and is contingent on finalising the contract, and on standard consents, approvals and licence transferrals for transactions of this nature.

The decision to divest BRM is consistent with Wellard’s strategy to hone its focus on its core activities – livestock vessel chartering; export of feeder and slaughter cattle to Asia; and export of breeding and dairy cattle.

The sale will allow management to focus solely on the shipping and trading divisions, which are the big drivers of Wellard’s revenue and earnings.

This transaction will provide approximately $8.0 million cash when realisation of working capital is included (and which will be assessed at completion, based on stock-on-hand and debtors at the relevant time).

Financing

Our debt levels are reducing, but they remain too high due to the relatively high repayment profile associated with ship financing.

Although beneficial in the medium term, this level of debt currently restricts the translation of EBITDA into NPAT and also has an impact on our competitiveness in the market. And the continuous breaching of covenants requires time and effort to gain waivers from our finance providers, who I thank for their support to date.

The Commonwealth Bank has extended its trading facility to February 2019 and will not be renewed. We are in the advanced stages of negotiation on a series of opportunities with alternative specialist financiers to provide agribusiness-focussed trading facilities which will replace CBA thereafter.

Debt restructure remains a key focus of board and management and CFO John Stevenson will explain some more during his part of the management overview.

Outlook

Wellard’s financial performance in the first four months of this financial year has been consistent with the outlook that we provided in our annual report at the end of August.

In the financial year to date, every one of our vessels has been utilised either on charter or with our traded cattle, which provides more consistent and visible earnings for our Company and shareholders.

We successfully completed three consecutive voyages of the MV Ocean Drover into Indonesia consisting of 57,722 traded cattle in total, capitalising on the availability and pricing out of Townsville. The Drover will now likely operate for the rest of the financial year as a charter vessel only. This reflects the new way we are running our business. I will elaborate further on the market outlook for 2019 and Wellard’s positioning later as part of our review of operations.

Conclusion

In closing I would like to thank all of Wellard’s people. Ours is a 24-7-52 business and I am constantly impressed with the dedication of Wellard’s staff at all levels, be it the people working on our ships or those caring for the cattle in our care. It is a tough industry where survival has been a challenge, the staff here today should be proud.

I also thank my predecessor David Griffiths, for the rigour and fairness he brought to the role. David retired on 28 June 2018 and I know the Board joins me in extending its appreciation. The Wellard Board is committed to turning around Wellard’s fortunes. It has begun, and we are doing everything we can to continue that turnaround.

-END-

Click here to view the Wellard 2018 AGM Presentation

ASX Announcement

Wellard Ltd (Wellard, ASX:WLD) has reported a significantly improved financial performance for the 2017/18 financial year as it continues towards a return to positive reported earnings.

Wellard achieved an EBITDA1 of $9.9 million in FY2018, which was a $32.2 million improvement on the EBITDA loss of $22.3 million in FY2017. Net Loss After Tax was $36.4 million, a $38.9 million improvement on the $75.3 million loss in FY2017.

Wellard Executive Chairman John Klepec said the trend was better, but reporting a loss was unacceptable.

“The Board, staff and management are committed to returning Wellard to profitability. We are heading in the right direction, but there is still more work to be done,” Mr Klepec said.

Two significant factors impacted on Wellard’s financial performance during the year.

Firstly the ‘cost out’ program announced by Wellard in 2017 targeted a $10 million reduction in year on year operating and administration expenses in FY2018. That program has been very successful with expenses reducing by 24.1% in 2018, a saving of $17.3 million in FY2018.

Secondly, vessel utilisation, which is an important contributor to the Company’s financial performance, was below budget. This was due to the default of a long-term charter of three long-haul voyages on the MV Ocean Shearer in the third quarter and overall sustained difficult market trading conditions.

Total revenue booked by the Company was $291.1 million, a 41.5% reduction on the $497.9 million revenue recorded in FY2017. This was largely driven by the increase in chartering activity, which in turn reduced the number of cattle and sheep bought and sold by the Company, and therefore the revenue it records.

Of the Company’s shipping capacity, 70.0% was utilised on external charter voyages in FY2018, compared to just 15.6% in FY2017.

This contributed to a 44.9% increase in gross profit from $27.6 million in FY2017 to $40.0 million in FY2018.

Wellard’s operating cashflows before interest improved from an outflow of $10.7 million in FY2017 to operating cash inflows of $7.7 million in FY2018.

Balance Sheet

Wellard improved a number of key balance sheet metrics in FY2018. Net debt reduced  from

$143.3 million to $136.6 million, interest cover ratio improved from (2.2):1 to 1:1 and its total loan to total asset book value decreased from 76.4% to 70.1%.

However, FY2018 net assets reduced from $131.2 million to $101.5 million, with the impairment of the Company’s previous MV Ocean Kelpie progress payments contributing to approximately half of that change.

Despite the improvement in a number of areas, Wellard was in breach of banking covenants at 30 June 2018. As a consequence, all of Wellard’s long-term debt was required to be classified as being current. As in prior years, the Company is in discussions with respect to waivers of covenant breaches on its debt facilities. Wellard is working closely with its financiers and to date has maintained a good relationship while engaging with them to obtain the necessary waivers.

The Company therefore does not expect all of its debt will be payable in the current financial year but rather as per the original maturity terms of the relevant agreements.

Improving Wellard’s balance sheet and working capital requirements are two principal areas of board focus.

Strategy and Outlook

The improved trading results the Company had achieved in the fourth quarter of FY2018 are expected to flow through to the first quarter of FY2019.

Consistent with its refocused strategy, Wellard has already contracted a significant percentage of its fleet out to third party charterers, which provides the company with greater earnings visibility and security.

As the year progresses, the team will place emphasis on securing contracts for the remainder of the year, with the objective of reducing risks on the bulk of the Company’s voyages.

Climatic conditions across northern Australia will have a large bearing on cattle supply and trading margins available to exporters in various markets, and therefore on Wellard’s ratio of exporter/charter voyages.

At the same time, it is important to note that Wellard has developed a loyal customer base in South East Asia, which the Company will continue to service.

“The Company is adopting a more opportunistic approach to trading cattle to South East Asia,” Mr Klepec said. “When market conditions in Australia and our customer markets enable a trading margin which is superior to the charter of our vessels, then our ratio of exports will increase.”

¹ EBITDA equals loss from continuing operations before income tax, less depreciation and amortisation expenses, less net finance costs, less other gains/(losses) arising from other activities, less impairment expense.

For further information:

Investors
Executive Chairman, John Klepec
Phone: + 61 8 9432 2800

Media
FTI Consulting, Cameron Morse
Phone: + 61 8 9485 8888
Mobile: +61 (0) 433 886 871

ASX Announcement

Wellard Ltd (Wellard, ASX:WLD) advises that it has received advice that exports of live cattle from Brazil have resumed after the Brazilian Government successfully applied to overturn an injunction which had temporarily suspended the trade in that country for two days.

“The Brazilian Government has demonstrated its support for the live export trade through its decision to successfully appeal the injunction,” said Wellard Executive Director – Operations, Fred Troncone.

Wellard reiterates its previous advice that it was not affected by the temporary suspension. It had no involvement in the injunction or court action, and its ships were not impacted by either.

For further information:

Investors
Executive Director Operations, Fred Troncone
Phone: + 61 8 9432 2800

Media
FTI Consulting, Cameron Morse
Phone: + 61 8 9485 8888
Mobile: +61 (0) 433 886 871

ASX Announcement

Highlights

• Operating EBITDA positive at $8.9 million, a $14.2 million turnaround
• Net loss after tax of $7.5 million, a $10.4 million improvement on 1HFY17
• ‘Costs Out’ program achieves $7.9 million reduction in total operational expenses and is ongoing
• Increased demand for charter vessels out of South America, but competition increasing
• Focus on converting lower administrative costs and revitalised marketing effort into a compelling customer proposition

Wellard Ltd (ASX:WLD) (Wellard or the Company) advises that improved vessel utilisation and a successful costs out program has enabled the Company to book a positive operating EBITDA of $8.9 million for the first half of FY18 (1HFY18), a $14.2 million turnaround on the negative $5.3 million operating EBITDA1 in the prior corresponding period.

The Company recorded a net loss after tax of $7.5 million for 1HFY18, a $10.4 million improvement on the $17.9 million loss for the prior corresponding period. EBITDA2 was $8.0 million.

Revenue was down by 41.9% to $163.7 million, reflecting the higher mix of ship charters in 1HFY18 compared to the prior corresponding period.

“Wellard’s financial performance has improved during the first half of financial year 18 but there are still challenges ahead” said Wellard Executive Director Operations, Fred Troncone.

“We improved our gross margin by 167.2% to 15.5% and reduced our operational expenses by 31.3%, which improved our operating cashflow and helped to reduce our debt. However, there is still more work to do.

“The biggest change to our operations in the past six months came as a result of the
Company taking advantage of chartering opportunities for our large, modern vessels onto the South America to Mediterranean route while using small vessels to retain longstanding customers in a very competitive, low margin South East Asian market, with a resultant decrease in market share in the second quarter.

“Our costs out program delivered savings of $7.9 million in the first half of the year and we are expecting to exceed our full year target of $10 million in annual overhead savings.

“It was pleasing that a higher proportion of voyages in the first half delivered a positive margin. The key now is getting our overall costs right, so the positive margin voyages translate into cash generation for the business and make our vessels more competitive in the external charter market.

“When the time is right we also need to return to higher margin trading contracts, which deliver a trading margin as well as transport margin.”

“Our costs out program delivered savings of $7.9 million in the first half of the year and we are expecting to exceed our full year target of $10 million in annual overhead savings.

“It was pleasing that a higher proportion of voyages in the first half delivered a positive margin. The key now is getting our overall costs right, so the positive margin voyages translate into cash generation for the business and make our vessels more competitive in the external charter market.

“When the time is right we also need to return to higher margin trading contracts, which deliver a trading margin as well as transport margin.”

Key elements of the 1HFY18 results relative to 1HFY17 results are as follows:

1HFY18 Prior Period*

* Prior period is 1HFY17, except for net assets and net cash which is 30 June 2017.

Operations

During the first six months of FY18 Wellard completed its first shipment of beef steers for processing to China. The shipment of approximately 2,000 cattle performed well and was positively received by the customer.

Wellard also shipped a second consignment of dairy heifers, from Portland, Victoria, to Sri Lanka, as part of the Company’s long-term contract with the Sri Lankan Government’s Ministry of Rural Economy.

In total, Wellard vessels performed 20 voyages in the first six months of FY18.

The number of cattle exported by the company fell by 46% as both of the Company’s larger vessels were chartered out to third parties for long haul voyages outside of Australia. Also, and in line with the Company’s strategic decision to match shipping capacity to market demands, the size of the Wellard fleet was reduced by the sale of the M/V Ocean Outback in July 2017.

Sheep processing volumes in the Company’s abattoir were down 27% on the prior corresponding period due to restricted supply and high prices, however that trend eased later in the half, leading to improved profitability in the final two months of the calendar year.

As part of Wellard’s ‘Costs Out’ program, the number of full time staff in the Company’s South American operations was reduced to key management positions, and cattle will be sourced through contractors who can provide a buying and aggregation service more cost-effectively. These changes have also enabled the closure of the Brescia (Italy) office and a further reduction in full time staff numbers.

Balance Sheet

Wellard finished 1HFY18 with assets of $293.1 million (FY17: $360.6 million) and liabilities of $171.1 million (FY17: $229.7 million).

The reported financial results caused breaches of Wellard’s banking covenants and the terms of its convertible notes on 31 December 2017, requiring the Company to continue categorising all long-term debt as a current liability, regardless of tenure. Loans and borrowings of $123.2 million in the absence of these breaches would have otherwise been classified as non-current liabilities as they are due to mature beyond 12 months from balance date. As in the past, the Company has requested and expects to receive waivers for all covenant breaches that occurred on or up to 31 December 2017. The Group made all payments due under its working capital facility and ship financing facilities during the period.

Cashflow

Cash as at 31 December 2017 reduced by $20.9 million to a balance of $12.2 million. This was primarily due to debt repayments, with net debt reducing by $22.6 million to $136.6 million.

Outlook

Mr Troncone said that while it was pleasing that Wellard was able to post improved results in the first half compared to the prior corresponding period, market conditions remain challenging for the second half of the financial year. While there are some early signs of minor improvements in selected markets, strong competitive pressures will continue to require sustained effort to claw back market share in the Company’s traditional markets and profitability.

“Demand for live cattle from countries in the Mediterranean, including Turkey, continues to be strong and we expect that a significant proportion of these will continue to be sourced from South America. We are seeing more shipping capacity being diverted into servicing these markets which creates greater competition, but we are receiving a good level of inquiry for our high quality vessels which importers recognise produce improved animal welfare and commercial outcomes.

“The number of inquiries for live sheep delivered to Middle Eastern markets is also increasing, which is also suited to Wellard’s fleet profile. In the December quarter the company renewed its marketing efforts in the Middle East which resulted in a charter being signed in January for a large vessel from Australia into the Arabian Gulf. The Company has since received further inquiries for other voyages into the region.

“Live export from Australia continues to be challenging, however, the price of heavy cattle is trending downward. The eastern young cattle indicator for January 2018 is about 15% lower than the corresponding period last year. This improvement has opened opportunities for small shipments of heavy cattle to China, which we expect will gradually increase as quarantine and processing infrastructure in coastal China develops, and assuming that Australian livestock prices remain attractive. We were pleased with our first shipment of slaughter cattle to China in November 2017 and we have since received inquiry for further shipments. Negotiations commenced in the December quarter have resulted in Wellard securing a contract to supply a large shipment of 10,000 breeding cattle to China before financial year end.

“Shipments into Vietnam and Indonesia which are Wellard’s traditional markets continue to deliver tight margins. Although the price of heavy (slaughter-ready) cattle has eased, this is partly offset by the appreciation of the Australian dollar to approximately US80c. The supply and price response at the end of the northern Australian wet season will be an important determinant of the profitability and size of our Australian operations for the remainder of the financial year.”

The Company’s ‘Costs Out’ program continues and remains on target.

“We are pleased with what the Company has been able to achieve with the reduction of overheads and expect to be able to exceed our target of a $10 million reduction in overheads in the financial year.” Mr Troncone said.

“With a lower administrative cost base and a renewed marketing effort across all main livestock demand centres, Wellard is better positioned to make compelling and more competitively priced offers across shipping charters and livestock trades.”

To view the full HY18 Results Presentation please click here.

For further information:

Investors
Executive Director Operations, Fred Troncone
Phone: + 61 8 9432 2800

Media
FTI Consulting, Cameron Morse
Phone: + 61 8 9485 8888
Mobile: +61 (0) 433 886 871

ASX Announcement

Wellard Limited (ASX:WLD) (Wellard or the Company) releases the address to be presented by the Chairman at the Company’s Annual General Meeting today at Botanical 4, Lower Level, Crown Convention Centre, Great Eastern Highway, Burswood at 10.00am (WST).

Chairman’s Address at 2017 AGM

In my message to Wellard Limited shareholders contained in the FY2017 Annual Report I set out in some detail the conditions our Company experienced in FY2017, how the Company has acted to counter these conditions and the Company’s most recent financial results.

I do not propose to repeat this message other than to say the statutory Net Loss of $75.3m (which included the $13.1m write down of the MV Ocean Outback prior to its sale) was a great disappointment to shareholders and to the Board, and one that required immediate action as it became apparent that the conditions which severely compressed margins in our traditional markets in FY2017 were likely to persist into FY2018.

The Company’s response so far has included significant restructuring, personnel changes, a rigorous ‘costs out’ program, asset sales, capital expenditure deferments, market diversification and a capital raising.

In my Chairman’s Report we set out the significant progress that we had made up to the time of the publication of the Annual Report, and I am pleased to say that progress with the restructuring and ‘costs out’ program is continuing. We estimate to have reduced overheads at an annualised rate of greater than $10 million (or about 27% on FY2017), with further savings and efficiencies expected.

Our Executive Director of Operations, Mr Fred Troncone, will provide more details on the success of these programs and what we expect to come in the year ahead.

The market environment remains challenging, with the continuation of high cattle prices in Northern Australia significantly compressing margins in our key Indonesian and Vietnamese markets. However there does appear to be some relief, with slightly lower prices being seen in the southern herd, which is opening up some opportunities in what will be the increasingly important Chinese market.

Wellard is very pleased to have successfully completed its first shipment of slaughter cattle to China this month and has had positive feedback from our Chinese clients. We are also encouraged by a level of enquiry that may lead to further shipments this Financial Year. We believe that structured properly, the China market represents a massive opportunity for our business, and we are increasingly confident that our first pilot shipment will be recognised as the proof-of-concept that started something much bigger.

We are also encouraged with the level of enquiry we are receiving from well-regarded parties in the Middle East for live sheep export and with the increased demand for the chartering of our two large ships into the South American to Turkey run, which we anticipate will enable Wellard to deploy these ships during much of the Northern Australian “wet season” at reasonably attractive rates without having the working capital burden and risks of shipping our own cattle. This latter development, together with a restructure of business engagement model in South America, has enabled the Company to reduce its infrastructure in South America and Europe and allows us to build up our experience in these important markets at a much-reduced
level of risk.

Mr. Troncone will cover the current operations in more detail and while it is clear conditions remain challenging we have seen an improvement in EBITDA Year-on-Year with an unaudited EBITDA for the first four months of the year to 31 October 2017 increasing to $3.4m, which is an improvement of approximately $7.6m from the same time last year, with about 78% of this improvement coming from cost savings. We expect the December 2017 half year will be a loss, and we will continue to require waivers from our financiers. While a return to profit is still very dependent on how market conditions play out over the medium term , the Board is confident that Wellard is on a path to improving its capacity to be leaner and better sized to meet the still tough market conditions. These factors I have mentioned lead us to have some cautious optimism in the medium term.

Throughout this difficult period, I am very proud to say that the Company’s commitment to employee safety, and to animal welfare, has not faltered. At last year’s Annual General Meeting I stated that Wellard had to improve its safety record, and I am pleased to say we have progressed on this journey. I am also proud to say that this improvement has been coupled with longer-term initiatives designed to lock in processes for risk reduction. Safety initiatives undertaken in the last year include a complete ban on four-wheel motorbikes and, at our Beaufort River Meats business, a significant investment in new cutting technology, which automatically shuts down blades when it senses a risk of cutting an employee.

Our commitment to animal welfare remains steadfast. Wellard is one of only two Australian companies to have unconditionally passed an intensive regulatory audit in Vietnam, and we have received no investigations or notices of non-compliance from livestock exported in the past financial year. The community demands that we focus our people, our processes, and our assets on good animal welfare outcomes. We recognise that this is a license to operate issue. We also recognise that looking after our livestock on land, in our ships and in our customer’s supply-chain is good for business. Unlike many of the aging fleet of livestock vessels which operate out of Australia and internationally, our fleet is designed for the safety of our people and the comfort of our animals.

So, while we have implemented changes to better ride out market conditions, our high-level strategies remain consistent. As we move forwards, we are focussed on achieving several strategic deliverables, being:

1. The creation of a balanced, more diversified portfolio of markets for our sales, where we are looking to be better placed to withstand single market exposure risk by achieving a spread of sales across the European and Mediterranean, Middle East and Chinese markets;
2. The development and implementation of effective, responsible and efficient processes throughout our business by further restructuring our operations, innovating and streamlining our processes and driving our ‘costs out’ program;
3. Placing our customers at the centre of everything we do, and preserving our valued and committed relationships with our key clients, in part by tailoring sale strategies to suit local requirements and customs;
4. Establishing more diversified and secure sources of supply by leveraging the work we have done in the Americas and by securing priority access to quality livestock where possible; and lastly
5. Over the longer term, further developing and exploiting additional strategic vertical integration opportunities.

Lastly, and notwithstanding the challenges we are working through, I would like to take time to thank our suppliers, bankers, advisers, and most importantly, our staff, who have all worked very hard these past twelve months, to continue to steer our Company through these difficult times. On behalf of all the Wellard directors, I thank you for your efforts.

To view the full AGM Presentation please click here.

ASX Announcement

Wellard Limited (ASX:WLD) is pleased to announce that the Company’s first shipment of beef steers from Australia to China departed from Portland, Victoria, yesterday afternoon.

Approximately 2000 cattle were loaded for the voyage to Shidao in the Chinese Province of Shandong.

The cattle are being supplied to Rongcheng HCMH Trade and Service Co., Ltd, a subsidiary of Tai Xiang Group, which is an established Chinese company specialising in frozen and processed food. The 2000 Angus and Angus-cross cattle were sourced from Victoria and South Australia.

Wellard Executive Director – Operations Fred Troncone said: “We have been very careful to make sure that our first shipment is managed professionally with quality cattle.

“We want to make this trial shipment an absolute success so that we can develop a more regular trade, grow our cattle exports to China and increase our vessel utilisation. A more regular trade will also send a strong signal to cattle producers that there will be enduring demand for their quality livestock.”

The cattle will be quarantined and then processed in a purpose-built facility which has been Exporter Supply Chain Assurance Scheme (ESCAS) accredited.

Wellard has been a long-term supplier to China, supplying dairy and beef breeder cattle as well as airfreighting breeding sheep. This shipment is the first shipment of cattle for processing.

Wellard China General Manager Bernie Brosnan said that in addition to the price competition Wellard provided for cattle producers, services providers including stock agents, truck operators, veterinarians, stockmen and women, tug boat crews, wharf workers, accommodation and food suppliers, and all their suppliers, would benefit from the shipment.

“There is a vast support network that has made the aggregation of cattle for our first shipment to China so successful and they each deserve credit for their role,” he said.

Mr Troncone said smaller shipments would dominate the initial live cattle trade between the two countries in the short term, but it had the capacity to increase significantly as the commercial landscape rebalanced.

“This shipment of cattle to China is a product of the Australia China Free Trade Agreement and the negotiation of health protocols between the two countries which took years to negotiate,” he said. “Both Governments should be congratulated on their foresight and willingness to open trade between the two countries.”

For further information:

Investors
Executive Director – Operations, Fred Troncone
Phone: + 61 8 9432 2800

Media
FTI Consulting, Cameron Morse
Phone: + 61 8 9485 8888
Mobile: +61 (0) 433 886 871

ASX Announcement

The Board of Wellard Limited (Wellard, ASX:WLD) announces that current Non-Executive Director, Fred Troncone, has been appointed ‘Executive Director – Operations’. Mr Troncone will assume management responsibility for all of Wellard’s day to day operational matters.

“Wellard has been taking steps to improve its operations and performance, which Mr Troncone will continue to drive through his management of day-to-day operations of the business. I will devote more time to strategic planning and the development of growth initiatives,” Wellard CEO and Managing Director Mauro Balzarini said.

Mr Troncone was formerly CEO of Wellard’s wholly-owned Wellard Rural Exports business from 2011 to 2015, and was general manager of the Company’s South-East Asia business from 2009 to 2010. Mr Troncone has extensive live export experience and has worked as a consultant in a range of industries, with a focus on digital strategies, organisational change and business transformation to positively leverage market conditions and business opportunities. His international business credentials include business in Australia, South-East Asia, China, the Middle East, Europe and Russia. Mr Troncone is an AICD graduate and holds a degree in Business Information Systems and a Masters of Business Administration.

Wellard Non-Executive Chairman David Griffiths said: “The Board is pleased that we can bring Fred Troncone’s specialised experience and his successful operational history in our industry to assist Wellard as it addresses the industry conditions and financial circumstances the Company has faced in recent times and positions itself for future growth as conditions improve.”

The Board has structured Mr Troncone’s remuneration with a significant ‘at risk’ component. Short-term and long-term incentives are subject to the achievement of performance targets, and will only be earned if Mr Troncone delivers real value for shareholders.

Details of Mr Troncone’s Executive Service Agreement are attached to this announcement. In effecting this management restructure, Wellard has charged CEO and Managing Director Mr Balzarini with responsibility for strategic planning and development of growth initiatives
for the Wellard business, and assisting with the effective transition of the operational responsibility to Mr Troncone.

Mr Balzarini’s Executive Service Agreement has been varied such that his employment with the Company shall continue until at least the later of 31 December 2017 and the Company having satisfactorily reshaped its banking arrangements with shipping finance provider,

Intesa. Mr Balzarini’s restraint period has also been adjusted to end on the date that is the later of 21 September 2018 or when he ceases to be an employee or a director of the Company. The Company has removed the option for 12 months gardening leave.
The other material terms of Mr Balzarini’s Executive Service Agreement remain in place. The Board believes that this strengthening of the management team will accelerate the improvement in the operating efficiency of the Company as well as adding to its marketing
and management capabilities.

For further information:

FTI Consulting, Cameron Morse
Phone: + 61 8 9485 8888
Mobile: + 61 (0) 433 886 871

ASX Announcement

Wellard Limited (ASX:WLD) is pleased to announce it has agreed commercial terms for the Company’s historic first shipment of beef cattle to China.

Approximately 2000 cattle will be loaded for the shipment from south east Australia.

The cattle are being supplied to Rongcheng HCMH Trade and Service Co., Ltd, a subsidiary of Tai Xiang Group, which is an established Chinese company specialising in frozen and processed food.

The shipment, despite being relatively small, is the largest to date of this type and represents a very significant step in the Company’s implementation of its strategy for China, said Wellard CEO and Managing Director Mauro Balzarini.

“We have been working very hard to develop the China market for a long time and I would like to congratulate Wellard’s China Team, and particularly Scot Braithwaite, Bernie Brosnan and Eva Fu for their fantastic marketing effort. We see this as the start of a long-term relationship with clients in China, in the same professional way we have worked closely with our customers in other markets for the last three decades, including establishing ESCAS supply chain integrity with a special emphasis on animal welfare.

“As we have stated before, China offers big potential for Wellard and the Australian cattle industry in general, and we are confident this first shipment will pave the way for the development of a more regular trade and grow our exports to China. This will benefit Wellard’s stakeholders and also producers in Australia as China will import cattle with different specification to Vietnam and Indonesia.”

The cattle will be quarantined and then processed in a purpose-built facility in China, which has been ESCAS (Exporter Supply Chain Assurance Scheme) accredited.

The sale contract is subject to conditions precedent including receipt of a deposit and completion of all letter of credit requirements.

For further information:

Investors
Managing Director, Mauro Balzarini
Phone: + 61 8 9432 2800

Media
FTI Consulting, Cameron Morse
Phone: + 61 8 9485 8888
Mobile: +61 (0) 433 886 871

ASX Announcement

Wellard Ltd (ASX:WLD) (Wellard) advises that the Company’s preliminary financial results for the year ended 30 June 2017 released today show revenue of $497.9m, Gross Profit of $27.6m and a Net Loss After Tax of $77.3m.

The Company’s loss before tax, excluding impairments on vessels, was $61.4m, which is in line with the $55m-$65m range provided by Wellard to the ASX in its announcement dated 18 July 2017. The anticipated additional non-cash write-down on the sale of the MV Ocean Outback totalled $13.1m as previously disclosed, which formed part of the $19.8m in asset impairments and write-offs set out the preliminary final accounts.

Wellard finished FY2017 with an improved net cash position of $33.0m, largely due to the capital raise completed by the Company in May 2017. An amount of $17.3m, being the net proceeds from the sale of the $34.9m MV Ocean Outback, was received subsequent to the financial year end.

Key elements of the FY17 results relative to the FY16 results are as follows:

Wellard CEO and Managing Director, Mauro Balzarini, said he and the Wellard management team were extremely disappointed by the financial results –

“Management and staff continued to work hard to manage the impact of historically high Australian cattle prices, which are impacting the Company’s volumes and margins, and therefore financial results,” Mr Balzarini said.

“The number of cattle we shipped for the financial year fell by 29 per cent. In addition, the high purchase price of cattle in Australia combined with price resistance in South East Asian markets reduced our margins.

“Persistently high Australian cattle prices have allowed frozen Indian buffalo meat to obtain a foothold in the Indonesian market, which is likely to have an ongoing impact on demand for Australian cattle. Whilst a segment of the Indonesian market continues to prefer Australian cattle there is a risk that volumes will not return to historical highs. High prices have similarly impacted demand from Vietnam.

“The lower demand for livestock from South East Asian markets during the period also resulted in excess shipping capacity, which forced freight rates lower, thereby reducing our shipping margins.”

These market conditions led the Company to accelerate expansion in the South America market. Whilst utilising excess shipping capacity, dealing with new suppliers and less familiar customers produced variable results. The Company is re-shaping its operations in this region to address these challenges.

It has also been actively managing its costs, its fleet utilisation and its cashflow.

“In response to market conditions we have commenced a cost out program, limited capital expenditure, reduced our head count, reinvigorated our sales effort and reviewed the size of our shipping fleet,” Mr Balzarini said.

“We sold the MV Ocean Outback in July 2017 and deferred the delivery date of the MV Ocean Kelpie until 30 November 2019, including the majority of related financial commitments, which have been pushed back by 12 months. These initiatives will improve the utilisation of the Company’s remaining shipping assets and have improved our balance sheet with extra cash from the sale. We have also contracted out ships for external charters when this was more profitable than exporting and shipping.”

Net debt was reduced by approximately $8.1m as at 30 June 2017 and was further reduced by $15.6m post-balance date due to the retirement of debt owed on the MV Ocean Outback.

Wellard finished the 2017 financial year with net assets of $129.3m (FY16: $188.8m). This consisted of total assets of $359.0m (FY16: $474.7m) and total liabilities of $229.7m (FY16: $286m).

The financial results caused several breaches of banking covenants on 30 June 2017 that required Wellard to categorise all long-term debt as a current liability, regardless of its tenure. Loans and borrowings of $138.0m would have otherwise been classified as non-current liabilities as they are due to mature beyond 12 months from balance date. As in the past, the Company has either received or expects to receive waivers for all covenant breaches that occurred on or up to 30 June 2017. The Group made all payments due under its working capital facility and ship financing facilities during the period.

Wellard has maintained a strong focus on animal welfare throughout the year without any major events recorded. Our purpose-built ships, dedicated animal welfare officers and an ongoing R&D program ensured that our success rates continued to be higher than industry averages.

Wellard will lodge its annual report, including its audited accounts, Directors’ Report and Remuneration Report, by 30 September 2017.

Outlook

The Company’s performance is sensitive to Australian cattle prices and foreign exchange rates. Pricing for some categories such as heavy slaughter cattle suited for Vietnam have eased. Prices for other categories remain at or close to historical highs, notably the lighter steers that are exported to Indonesia, Wellard’s largest market.

“We are beginning to see increased interest for shipping capacity to China and the Middle East and have recently signed a number of external charters to third parties. The recent fall in prices for heavy cattle is also increasing the viability of shipments to markets such as Vietnam,” Mr Balzarini said.

“Whilst conditions remain subdued this is helping to improve our financial performance in the first few months of the new financial year, but until we see if price reductions are sustained through the upcoming wet season and into 2018, it remains unclear what impact that will have on Wellard’s overall FY2018 results.

“We continue to view exports of slaughter and feeder cattle to China as a real opportunity for the business when delivered Australian cattle prices reach a level that is competitive against the Chinese domestic supply.

“In the meantime, we continue to actively manage the business through the current challenging trading conditions so that we can leverage the benefits of our strategic assets when the spread between our purchase price and selling price normalises.”

The Company remains the largest exporter of cattle from Australia, with market leading positions in Indonesia and Vietnam. It has reduced overheads by 21%, has an improved cash position, and owns and operates one of the largest and the most modern livestock transport fleet in the world.

For further information:

Investors
Managing Director, Mauro Balzarini
Phone: + 61 8 9432 2800

Media
FTI Consulting, Cameron Morse
Phone: + 61 8 9485 8888
Mobile: + 61 (0) 433 886 871

ASX Announcement

Wellard Limited (Wellard, ASX:WLD) is pleased to announce it has added more live export experience to its board, appointing Fred Troncone as a non-executive director of the Company.

Mr Troncone is a former CEO of Wellard Rural Exports. Since he left Wellard Rural Exports in mid-2015 he has worked as a consultant in a range of industries, with a focus on digital strategies, organisational change and business transformation to positively leverage market conditions and business opportunities.

His international business credentials include business in Australia, South East Asia, China, the Middle East, Europe and Russia.

Wellard Chairman David Griffiths said Mr. Troncone’s appointment provides the Board with additional expertise and experience in live export.

“The board was seeking a very specific skillset and Fred possesses that skillset,” Mr Griffiths said. “He was instrumental in growing the Wellard Rural Exports business from 2009 to 2015 as well as overseeing enhanced reporting and planning systems. He is also highly committed to animal welfare.

“Combined with his experience in other relevant sectors, such as the banking industry, Fred will be a significant contributor to the board. A number of key shareholders were consulted during the board’s due diligence process and all were very supportive of Fred’s appointment. Mr Troncone is not aligned to any major shareholder.”

Mr Troncone is an AICD graduate. He holds a degree in Business Information Systems and a Master of Business Administration.
His appointment will be proposed for shareholder ratification at the Company’s Annual General Meeting in November.

For further information:

Investors
Managing Director, Mauro Balzarini
Phone: + 61 8 9432 2800

Media
FTI Consulting, Cameron Morse
Phone: + 61 8 9485 8888
Mobile: +61 (0) 433 886 871

ASX Announcement

Wellard Limited (Wellard, ASX:WLD) provides the following clarification in respect of the market update dated 17 July 2017.

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.

In respect of the anticipated loss related to the voyage in South America, the loss reported in this financial year is likely to be in the range of A$8M to A$10M. This loss arose as a result of delays which caused some cattle to go out of specification, after which some stock was sold to another buyer at lower than predicted prices. This issue relates to the specific voyage only and does not indicate any mechanical issue with the Wellard vessel involved.

For further information:

Investors
Managing Director, Mauro Balzarini
Phone: + 61 8 9432 2800

Media
FTI Consulting, Cameron Morse
Phone: + 61 8 9485 8888
Mobile: +61 (0) 433 886 871

ASX Announcement

Wellard Limited (ASX:WLD) provides the following market update.

The Company is currently finalising its FY2016/17 audit and annual results, and expects that its trading losses for the second half of the financial year are likely to be significantly higher than the A$16M loss reported in the Company’s first half. The total loss for the financial year will also be impacted by asset impairments and write-downs, and will not be fully known until nearer to end-August 2017.

There are a series of reasons for these results, including a reduction of demand from South East Asian markets due to sustained high cattle prices in Australia resulting in extended favourable conditions for growers after the end of the Northern Australian wet season, and an extraordinary loss on one voyage in South America.

Industry results for the calendar year-to-June for feeder and slaughter cattle exports were 38% lower, compared to the prior corresponding period.

The price of cattle in Australia has remained uneconomically high, with live exporters and abattoirs facing considerable competition for cattle from growers both holding stock and building their herd. 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.

Wellard has completed the sale of its ship, the M/V Ocean Outback, and this will return approx. A$17.6M cash to the Company, and retire approx. A$15.6M in debt. An impairment of approx. A$13.1M will be realised, as previously announced.

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.
Wellard has continued its operational review and costs-out programme, and has reduced headcount and overheads in both international and Australian domestic locations. The Company has improved its trading terms with key supplier partners, and is continuing to charter vessels to third parties where possible, which assists to cover outgoings on the vessels and avoids long periods of under-utilisation.

“Wellard is disappointed to be in this position. Our previous expectations of market improvement at this point in the season have not materialised, with conditions remaining extremely difficult. This is evidenced by more than 60% drop in exports to Indonesia in June, compared to the same period last year. Our markets continue to defy normal seasonal trends, with previous positive signals being brief and not sustaining.”

“Wellard remains focussed on improving operational flexibility to be ready when markets improve. Our stronger balance sheet with higher cash and lower debt, plus a lower fixed cost base will help us to sustain this market downturn and will allow us to return to profitability once conditions improve.” said MD Mr Mauro Balzarini.

Wellard is due to release its final FY2016/17 results at the end of August.

For further information:

Investors
Managing Director, Mauro Balzarini
Phone: + 61 8 9432 2800

Media
FTI Consulting, Cameron Morse
Phone: + 61 8 9485 8888
Mobile: +61 (0) 433 886 871

ASX announcement

Wellard Limited (“Wellard”) (ASX:WLD) has signed a binding Memorandum of Agreement (“MoA”) to sell one of its livestock vessels, the M/V Ocean Outback, for USD26 million (approx. A$34.9 million).

The vessel will be purchased by Israeli company, Dabbah Slaughterhouse Limited (or its nominee) (“Buyer”). The sale of the mid-sized M/V Ocean Outback, which was built in 2010, is part of Wellard’s ongoing review of its fleet to match its shipping capacity to current market conditions and future fleet additions.

The sale of the M/V Ocean Outback will result in an estimated:

• USD12.17 million (approx. A$16.34 million2) reduction in existing debt;
• USD13.57 million (approx. A$18.22 million) increase in cash on hand; and
• USD9.7 million (approx. A$13.02 million) non-cash accounting loss resulting from the impairment in the book value of the asset and related inventory.

Wellard expects completion of the sale of the M/V Ocean Outback to occur in first quarter of FY2018. The sale is subject to the Norwegian Shipbrokers’ Association’s Memorandum of Agreement for Sale and Purchase of Ships (BIMCO Form Rev, 2012), which provides standard terms and conditions adopted internationally for sale of oceangoing ships, and includes certain provisions, such as a final inspection of the vessel that may result in minor adjustment to the cash received. The vessel has undergone recent drydocking in Singapore and is considered in good working condition.

The sale proceeds (net of vessel finance) will be used for working capital.

Wellard CEO, Mauro Balzarini said: “Wellard regularly reviews the make-up of its fleet to match it to current and expected future capacity
demands. As previously announced in the Company’s 3 April 2017 Offer Document, Wellard had received several approaches from parties interested in purchasing our vessels, so we used the opportunity to progressthe sale of the M/V Ocean Outback to right-size our fleet. The cash-realisation and efficiencies Wellard gains in our view outweigh the capital loss on this transaction.

“Wellard continues to work through very difficult trading conditions, which have remained soft in the second half of the financial year. As previously announced, there will be trading losses reported in the Company’s year-end accounts.

“The Company is reviewing the carrying value of its assets, and subject to valuation, this may result in impairments when it finalises its accounts at year-end, which, together with expected higher trading losses, will lead to a second half loss higher than the first half. The quantum of such losses is yet to be determined as the year is not complete.

“Notwithstanding the very tough year, we are managing our way through. The completion of the Company’s A$53 million capital raising, our Costs Out Programme, and 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.”

For further information:

Investors
Managing Director, Mauro Balzarini
Phone: +61 8 9432 2800

Media
FTI Consulting, Cameron Morse
Phone: + 61 8 9485 8888
Mobile: +61 (0) 433 886 871
Visit www.wellard.com.au

ASX announcement / Media release

Wellard Limited (“Wellard”) (ASX:WLD) is pleased to announce the appointment of Chinese businessman Mr. Kanda Lu as an executive director of the Company. As announced in Wellard’s 3 April 2017 Offer Document, Non-Executive Director, Mr. Greg Wheeler has now retired from the Board.

Mr Lu is the Assistant to the Chairman of major Wellard shareholder Fulida, and possesses considerable expertise in Chinese commerce, distribution and marketing.

His former positions include Head of Sales of Morgan Stanley Huaxin, Vice President (Institutional Clients) of Ping An Securities, Senior Manager (Institutional Asset Management) of Dacheng Fund, and Business Development Associate (NSW Branch) of Australian Finance Group. Mr Lu graduated from Macquarie University, obtained a Master’s degree in International Relations with the degree of Master of International Trade and Commerce Law, and a Bachelor’s degree in Commerce.

In addition to his selection to the Wellard board, Mr Lu has been appointed as Head of China Initiatives. He will also be Managing Director of Wellao, Wellard’s 100 percent-owned Chinese subsidiary, and responsible for the development and growth of Wellard’s entry into the Chinese beef cattle market.

Wellard’s strategy for China involves working with third party importers as well as developing its own supply chain through Wellao’s investment in feedlots and an abattoir. The Company’s core business supplying existing operators is being implemented immediately, while the timing of Wellao’s development will be dictated by market conditions.

“Wellard has been exporting cattle to China for a decade now as a supplier of breeding cattle. The new protocol for slaughter and feeder cattle is an enormous opportunity to expand into this huge market. The skills Kanda brings to Wellard and Wellao, combined with his intimate knowledge of Chinese market dynamics as well as asset and managements skills, sets Wellard apart from its competitors and will enable it
to capitalise on its potential,” said Wellard CEO Mauro Balzarini.

Mr Lu said he was looking forward to joining Wellard.

“The China market provides untapped opportunity for Australian live cattle exporters and producers. Like all new trading relationships, it will take time to establish, but when it does the possibilities are exciting,” he said.

“I look forward to joining the Wellard board so I can assist with the strategic direction of the Company. The board and management has done an excellent job in managing the current tight trading environment and its modern shipping fleet and livestock procurement and export expertise means it is well positioned to benefit from the expected change to the commercial landscape.”

Mr Lu replaces Mr Greg Wheeler on the board. Mr. Lu’s appointment will be proposed for shareholder ratification at the Company’s 2017 Annual General Meeting.

The Board extends its sincere thanks to Mr Wheeler for his service.

Wellard’s Chairman, Mr. David Griffiths, said “Greg has provided diligent and professional service and judgement to the Board and the Company over the years of his involvement which pre-dates the Company’s public listing. In particular, we have valued his energy and contribution through Wellard’s major corporate initiatives, including the IPO, the difficult trading conditions we have experienced in recent times and our current capital raising”.

As previously announced, to further strengthen the Board, in consultation with major shareholders, the Company will also conduct a search for an additional non-executive Director who will not be associated with any major Shareholder and will likely be considered independent, with appropriate expertise and experience (having regard to the nature of the Company and the current composition of the Board), including in the context of a listed public company.

For further information:

Investors
Managing Director, Mauro Balzarini
Phone: +61 8 9432 2800

Media
FTI Consulting, Cameron Morse
Phone: + 61 8 9485 8888
Mobile: +61 (0) 433 886 871

ASX Announcement

Shareholder correspondence dispatched with Entitlements Issue offer documentation

Wellard Limited (ASX:WLD) refers to the Company’s fully underwritten non-renounceable pro-rata entitlement offer on a 1-for-4 basis at an issue price of $0.185 per share to raise approximately $19.7 million (before costs) (Entitlement Offer), which was announced on 3 April 2017, full details of which are contained in the Offer Document also released to ASX on that date.

The Company confirms that the following attached documents have been dispatched to shareholders:

1. Letter to eligible shareholders, being those shareholders whose registered address is in Australia, New Zealand, Hong Kong, Singapore or Italy as recorded on the Company’s share registry as at 7.00pm (Sydney time) on 11 April 2017; and
2. Letter to ineligible shareholders, being those shareholders whose registered address is not in Australia, New Zealand, Hong Kong, Singapore or Italy as recorded on the Company’s share registry as at 7.00pm (Sydney time) on 11 April 2017.

The Company expects to dispatch the Offer Document to eligible shareholders on 13 April 2017. The Offer Document will attach a personalised Entitlement and Acceptance Form, which will set out the number of new shares which eligible shareholders are entitled to under the Entitlement Offer, details of payments options and other instructions. Eligible shareholders should read and follow these instructions carefully to ensure their acceptance is completed according to their intentions.

If you are an eligible shareholder and you do not receive a paper copy of the Offer Document, you can obtain a paper copy at no charge, by calling the Wellard Limited Offer Information Line on 1300 135 403 (within Australia) or +61 1300 135 403 (from outside Australia).
The Entitlement Offer is currently scheduled to close on 8 May 2017 (5.00pm (Sydney time)).

For further information:

Investors
Managing Director, Mauro Balzarini
Phone: +61 8 9432 2800

Media
FTI Consulting, Shaun Duffy
Phone: +61 8 9485 8888

ASX Announcement

Wellard Limited (Wellard or the Company, ASX:WLD) is pleased to announce a fundraising initiative to raise approximately $52 million (before costs). The fundraising will be comprised of:

• a placement of 25 million new shares to sophisticated and institutional investors at $0.24 per share to raise $6 million (Placement);
• a fully underwritten non-renounceable pro rata entitlement offer on a 1-for-4 basis at an issue price of $0.185 per share to raise approximately $19.7 million (Entitlement Offer); and
• the issue of US$20 million in convertible notes (Convertible Notes) to raise approximately $26.3 million.

The Company has today also lodged with the ASX the offer document for the Entitlement Offer (Offer Document) which shareholders are urged to read in its entirety. The Offer Document includes fulsome details of the fundraising and its effect on the Company, an update of the Company’s outlook and details of the identified risks relating to the Company.

Wellard CEO Mauro Balzarini said the fundraising would replenish working capital and enable the Company to focus on taking advantage of any changes to the commercial trading environment in live cattle exports.

“Following a prolonged period of very difficult trading conditions with reduced margins and cash flow, we needed to bolster the Company’s working capital position to enable the Company to negotiate better trading conditions, and strengthen the balance sheet, as well as improving our overall liquidity.

“Whilst demand from traditional markets has eased due to higher price pressure, Wellard believes volumes can return to historic levels with price reductions in Australia. As we expect an improvement in cattle supply over time, we need to be ready to capitalise on our competitive advantages in the marketplace if and when this eventuates.” he said.

Please click here to view the full Offer Document.

ASX Announcement

Wellard Limited (Wellard, ASX:WLD) welcomes the decision by one of Australia’s largest cattle producers, Heytesbury Pty Ltd, to purchase a significant shareholding in Wellard.

Heytesbury, which is owned by Paul Holmes à Court, lodged a substantial shareholder notice with the ASX today, indicating it had acquired 9.57 per cent of Wellard shares.

“It was welcome news to see such a highly respected businessman with direct and relevant sector experience and investment in beef cattle choosing to invest in Wellard,” said Wellard CEO Mauro Balzarini.

“Heytesbury Cattle Co has supplied Wellard with cattle for a long time, so its management has a strong understanding of both the Wellard business and the opportunities available to it.”

Heytesbury Cattle Co. owns six stations spanning 2.5 million hectares across the Northern Territory and eastern Kimberley region of WA. Among these is the famed Victoria River Downs, which was established in 1883. It runs 160,000 cattle, in total.

For further information:

Investors
CEO, Mauro Balzarini
Phone: + 61 8 9432 2800

Media
FTI Consulting, Cameron Morse
Phone: + 61 8 9485 8888
Mobile: +61 (0) 433 886 871