Wellard, one of the country’s largest exporters of live cattle and sheep, sent a letter to the Australian Securities Exchange to confirm it would use proceeds to “replenish working capital”.
The business has been under financial pressure for some time. Low cattle supply in Australia has led to soaring livestock prices, which have hit the company’s profitability. Wellard has also twice breached banking covenants, once in 2016 and once in January this year, increasing the pressure it is under.
As part of the fundraising push, Wellard will offer up 25 million new shares to what it called “sophisticated” investors in a bid to rake in AU$6m of the overall target. It is offering existing shareholders a one-for-four share deal to raise AU$19.7m. Convertible notes worth AU$20m will also be issued to raise over AU$26m.
The livestock exporter also plans to use AU$2.8m from the raised capital buy China-based Fulida’s 50% stake in Hong Kong’s Wellao Agriculture, a joint venture formed in 2015 by Wellard and Fulida.
Wellard CEO Mauro Balzarini said the company needed to raise extra capital to help the company take advance of changes to commercial livestock trade, should any emerge.
“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.”
Balzarini said he expected the cattle supply issue to ease over time, although high prices in traditional markets could remain. The business, he added, believes cattle volume trade could return to “historic levels” and, as such, Wellard needed “to be ready to capitalise on our competitive advantages”.