Profits ‘lower than anticipated’ for livestock shipper Wellard

By Oscar Rousseau contact

- Last updated on GMT

Wellard's new ship, M/V Ocean Shearer, can transport up to 75,000 sheep
Wellard's new ship, M/V Ocean Shearer, can transport up to 75,000 sheep

Related tags: Generally accepted accounting principles, Wellard

Wellard Ltd, one Australia’s foremost livestock transporters, is braced for a drop in earnings, with the high price of cattle expected to dent full-year trading figures.

A heavy season of rain in northern Australia has driven the price Wellard pays for cattle up by 80-100 cents per kilogram when compared to last year. Such an unexpectedly high price for live cattle has heaped pressure on the company. It now expects its unaudited financial results for the fiscal year, ending 30 June, to reflect lower earnings.

Wellard expects to post pro-forma net profit of between AU$23.5 million and AU$30m based on the current foreign exchange rates. Shipping and trading of livestock for the month of June is still ongoing and this could affect the final financial result, as Wellard still has seven shipments to load before the financial year concludes in a fortnight.

Complicated changes to the recent shipping schedule are expected to have the “largest impact​” on the company’s forecast earnings, according to the financial report. Some of the shipments have had to be delayed, meaning the results won’t be included in this year’s financial report. Two of Wellard’s largest livestock carriers, including the newly-launched M/V Ocean Shearer​, have had to change shipping routes.

Buoyed by Brazil

The margin pressure we encountered trading and shipping cattle from Australia to south-east Asia supports our decision to increase our focus in countries like Brazil, which has a cattle population of more than 220m head and strong trading margins,​” said Wellard CEO Mauro Balzarini on 10 June.

These challenges caused Wellard to divert the M/V Ocean Shearer – dubbed a ‘floating farm’ – to South America. But the additional sailing time, coupled with the time spent in port, meant the vessel – which can carry 20,000 cattle or 75,000 sheep – will only complete one voyage this fiscal year.

The linked pressure of shipping changes and price volatility in Australia is expected to continue in the short- to mid-term. Wellard said farmers had benefited from this, using the time to rebuild their herds, meaning cattle numbers were likely to rise in the future.

In time, the restocking will lead to improved cattle supply in Australia,” ​said Balzarini. “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.​”

In the face of challenging headwinds Wellard’s CEO said the company would remain “profitable​” and the overriding long-term outlook “remains positive​”. The launch of the M/V Ocean Shearer has doubled Wellard’s shipping capabilities, and plans for development with Turkey and China are under way. Balzarini said this highlighted the fact the business was committed to executing a strategy for growth.

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