WELLARD'S M/V Ocean Outback set off for the Middle East last weekend, as part of its six live export shipments before the end of the financial year aimed at avoiding issuing another profit downgrade on the Australian Securities Exchange.
Subscribe now for unlimited access to all our agricultural news
across the nation
or signup to continue reading
The WA company listed in December at $1.39 a share, which valued the company at $560 million, but its shares slid to 37 cents after Wellard issued an update on its second profit warning within six months of being a listed entity.
Wellard said six shipments were scheduled to load and sail before June 30, but the plans could change.
The M/V Ocean Outback loaded 3000 WA cattle and 8000 WA sheep, left Fremantle port on Saturday and is due to arrive in the Middle East in early July.
The vessel struck trouble in December and was stranded for two weeks, until it was able to limp on one engine from Fremantle Harbour to Vietnam, but had not encountered issues since.
After a series of cuts to full-year profit forecasts which were blamed on mechanical issues, commissioning setbacks, scheduling issues and high prices, Wellard said it expects its forecast pro forma full-year net profit after tax would be at the bottom of the $23.5m-$30m range disclosed to the market on Friday.
Wellard said it had "greater clarity about expected profitability of those shipments as they get closer to loading'' which combined with the "persistence of the continued margin compression from record cattle prices" would see profit at the lower end of the range.
"Due to the proximity of the end of the financial year, outcomes of some of the remaining shipments may still influence the forecast," Wellard said in a statement.
"A further change to the forecast is therefore possible, particularly given one of these shipments is a large shipment."
Wellard chief executive officer Mauro Balzarini said the forecast results were lower than anticipated.
"It is certainly lower than we would have liked," he said.
Wellard had been affected by changes in its shipment schedule that has pushed two large exports from June to July.
The company responded to the changed market dynamics by diverting its newly launched M/V Ocean Shearer to South America.
However the additional sail and turn-around time in port meant the vessel would only complete one voyage this financial year, rather than the planned two.
It is scheduled to being loading in Brazil in July.
Mr Balzarini said the margin pressure in trading and shipping cattle from Australia to South East Asian markets supported Wellard's decision to shift focus to countries such as Brazil.
"Brazil has a cattle population of more than 220m head and strong trading margins," he said.
The higher than expected prices for Australian cattle were putting pressure on its margins, which had contributed to its decision to divert one of its ships to South America, rather than sail to South East Asia.
"Heavy out of season rain in northern Australia has meant the price we have paid for cattle has consistently been 60-100 cents per kilogram higher than the prior corresponding period,'' Mr Balzarini said.
"There has been strong customer resistance to those high prices and trading margins have been impacted as a result."
Boyup Brook cattle breeder Neil Derrick said the price situation was getting scary.
"People are going to get their fingers burnt," Mr Derrick said.
"It is worrying times for the whole industry. We have had a drought and there is a lot of competition from New Zealand and South America we just can't compete with those prices.
"The costs are too dear.
"We don't want to turn into the dairy industry, because our markets are not taking Australian beef."
Mr Derrick said WA box beef exports had already dropped in a year and other markets were building their herds so the beef industry needed to be cautious moving forward.
Wellard expected the shipping and trading margin pressure in Australia will be short to medium-term.
"In time the restocking will lead to improved cattle supply in Australia," Mr Balzarini said.
"In the meantime the mobility of our assets allows us to increase our shipping and trading activity in South America, where cattle supply is greater and margins are better.
"We are continuing to execute our growth strategy, with the successful commissioning of the M/V Ocean Drover, which increases the company's shipping capacity by 50 per cent.
"We expect a growth in cattle shipment numbers, diversification of supply markets and downstream developments in China and Turkey will bring significant future benefits to Wellard."
