THE chair of Australian livestock shipping company Wellard has urged livestock industry participants to actively stand up for the live cattle trade, which he says is now only “one catalyst” away from the same outcome as the live sheep export trade.

Despite assurances from Federal Labor that it supports live cattle exports, the “same noises” that led to the demise of the live sheep trade are now being made about the cattle trade, Wellard chair John Klepec said in a letter to shareholders as the company announced its full annual  results this week.

The ASX-listed livestock vessel charterer reported a net loss after tax of A$1.18 million (US$0.8 million) for the financial year ended 30 June 2024 (FY2024), which compares to an A$22.9 million (US$15.5 million) loss recorded in FY2023.

“Despite the current Labor Government’s stated policy of support for the live cattle industry, there only needs to be one catalyst which could see the live export of cattle from Australia banned,” Mr Klepec said

The “one catalyst” to end live cattle exports could come in the form of a future Australian Labor Party coalition, involving either the Greens or Teal Independents, who have both voted previously (except for one Teal Independent) to also ban the live export of cattle in Parliament, with the banning of live cattle exports one of the concessions required for their agreement to a coalition.

Australia’s live sheep customers turning to countries with lower welfare standards

He also added that Wellard had not seen “any good evidence” that the proposed Australian sheep export ban would encourage or force any existing customers of Australian live sheep to import boxed, processed sheep meat.

“Instead, we have seen international customers turning to alternative suppliers of live sheep from countries with lower animal welfare and shipping standards than Australia,” he said.

For example, when sheep from Somalia provided importers with the certainty of supply they required, traders seized on the opportunity created by the undermining of the trade from Australia by lack of Government support and replaced the Australian sheep with Somali livestock, Mr Klepec said.

In CY2023, Somalia exported 2.8 million sheep, an increase of 780,000 sheep on the 2.1m exported in CY20222 .

Australia exported approximately 600,000 sheep in the same period.

“Seeing farmers having to cope with thousands of unsellable sheep on their farms is not due to the trade being commercially unviable, as the current Government would have the public believe.

“Instead it is directly attributable to those Members of Parliament that have been part of a comprehensive campaign of undermining the trade over many years. The recently enacted ban is only the latest act.”

Compensation may not reach affected producers

He also questioned how much of the announced compensation for sheep producers impacted by the closing of the live sheep trade would ultimately flow to those affected, and “what chunk” will be carved off for the Department to administer the program.

“If history is any guide, very little will ultimately flow to farmers.

“The cattle industry is still waiting 13 years later for the Brett class action proceeds to be agreed and disbursed, whilst costs continue to grow.

“Wellard encourages all industry participants to actively stand-up and protect the Australian live cattle trade from the same outcome as the sheep trade.”

FY2024 headwinds switch to a strong tailwind in last quarter

Despite posting a loss of A$1.1 million for the 2024 financial year, the result represented a sharp improvement on the company’s FY2023 result.

In filing its FY2024 audited accounts, the Company posted EBITDA of A$6 million (US$4.1m), well up on the negative EBITDA of A($6.5m) (US$(4.4m)) reported for FY2023.

Additionally Wellard has agreed to sell its oldest livestock vessel, the MV Ocean Ute for A$17.8m (US$12m), with delivery expected in September 2024.

Wellard said its balance sheet remains in a strong position with A$13m (US$8.8m) in cash and cash equivalents contributing to negative net debt of A$11.8 (US$8.5m) as of 30 June 2024.

Apart from a A$0.4m (US$0.3m) lease liability, Wellard currently has no debt from loans or borrowings.

“Despite the trading challenges in H1 FY2024, our vessels recorded better utilisation in FY2024 compared to FY2023, which was the key to the improved financial performance in the most recent reporting period,” the results statement said.

“However, live export trading conditions for all exporters, ship operators and importers remained highly variable.”

Wellard said its board and management have taken a number of actions during FY2024 in response to changing supply and demand factors including:

Relocating the large-sized M/V Ocean Drover away from the Australian market to the reactivated South America to Türkiye trade at the end of FY2023.

Redelivering the M/V Ocean Swagman to its owner in February 2024 at the expiration of its time charter.

Further reducing overheads, including substantial staff reductions as Wellard’s operations were concentrated in Singapore and the Australian office was reduced to Board members only in late FY2024.

Selling the M/V Ocean Ute, with settlement in September 2024, and making a capital return of AUD 2 cents a share from some of the sale proceeds, subject to shareholder approval at Wellard’s upcoming AGM scheduled for 22 November 2024.

Continuing productive engagement with the liquidators of Ruchira Ships Limited (In Liquidation) (“Ruchira”), the registered owner of the M/V Ocean Drover, to seek a commercial resolution that will result in the return to Wellard of full, unencumbered legal title to the vessel.

‘A one-ship company’

Wellard will become a one-ship company with the M/V Ocean Drover once the M/V Ocean Ute is delivered to her new owners this month.

“The dynamics of ship size and underlying market demand means that the M/V Ocean Drover is currently competitive in only two of the four markets where Wellard has traditionally operated – the long haul South American export market to Türkiye and other Middle Eastern countries, and high value breeders from Australia (and New Zealand once that market re-opens for exports) to China.

“Looking forward, the market demand for breeder cattle into China is best described as patchy, with lower volumes expected in FY2025, which has been reflected in the sustained material price correction that has taken place for Australian dairy breeders,” Mr Klepec said.

“The M/V Ocean Drover is contracted on multiple charters to service the Brazil/Uruguay to Türkiye market for the rest of FY2025. Food security is driving demand for cattle in this region, and despite a surplus of livestock ships, the charter demand for the M/V Ocean Drover remains high given its proven record on animal welfare and ship safety, and we see no change for calendar year 2025.”

Summarising the outlook for Australia’s major cattle export markets, It said demand was now the fundamental market driver in Indonesia after years of constrained supply, while Vietnam would remain an opportunistic market for Australian slaughter cattle due its price sensitive nature.

More details can be found in Wellard’s full ASX Announcement.