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Live exporter Wellards turns its ship around and signals renewed sheep interest

Sheep Central, February 7, 2018

WESTERN Australian live exporter Wellard has signalled a potential lift in its involvement in the Middle East live sheep trade as it posted an $8.9 million increase in earnings before interest, tax, depreciation and amortization in the first six months of the current financial year.

Wellard Ltd advised the Australian Stock Exchange 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 the current financial year, a $14.2 million turnaround on the negative $5.3 million operating EBITDA in the prior corresponding period.

Wellard executive director operations, Fred Troncone, said the biggest change to company operations in the past six months came from taking advantage of chartering opportunities for its large, modern vessels onto the South America to Mediterranean route. It used small vessels to retain long-standing customers in the very competitive, low-margin South East Asian market, with a resultant decrease in market share in the second quarter, he said.

The company’s substantive re-entry into the Middle East live sheep trade is a goal rather than a reality at this stage and its last significant shipment into the Middle East as an exporter was more than two years ago.

However, Mr Troncone said today the number of inquiries for live sheep delivered to Middle Eastern markets is increasing, which also suited 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.”

Australia exported about 1.8 million sheep to mainly Middle East markets in the 12 months to March 2017, down from just over 2 million in the 12-month period to March 2016. The number of sheep exported into Qatar, Israel, Jordan and Oman increased up to March 2017, but declined into the UAE and Kuwait, with no shipments into Bahrain nor Egypt.

Wellard trims back its losses

Wellard Ltd recorded a net loss after tax of $7.5 million for the first half of the 2017-18 financial year, a $10.4 million improvement on the $17.9 million loss for the prior corresponding period. EBITDA was $8 million.

Revenue was down by 41.9 percent to $163.7 million, reflecting the higher mix of ship charters 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,” Mr Troncone said.

“We improved our gross margin by 167.2pc to 15.5pc and reduced our operational expenses by 31.3pc, which improved our operating cashflow and helped to reduce our debt.

“However, there is still more work to do,” he said.

Mr Troncone said Wellard’s costs-out program delivered savings of $7.9 million in the first half of the year and the company was expecting to exceed its 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,” he said.

“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.”

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