Wellard may restructure further to cut costs

By Oscar Rousseau contact

- Last updated on GMT

Wellard was hit by rising cattle prices in Northern Australia, denting its margins
Wellard was hit by rising cattle prices in Northern Australia, denting its margins

Related tags: Middle east

“Further restructuring” of loss-making livestock exporter Wellard could be on the way, the company’s chairman David Griffiths has warned.

Wellard is one of Australia’s biggest livestock suppliers, serving Asia and the Middle East, and has not ruled out fresh cost-cutting to alleviate margin pressure.

This would follow “significant restructuring​” and “personnel changes​” that transpired earlier this year, as the business posted a net loss​ of AU$75.3m (US$57m).

Griffiths, in his message to company shareholders this week, called the loss a “great disappointment​” and set out how the business could “ride out​” the tough market.

Wellard’s five-point plan

• Building a balanced range of markets by growing sales to Europe, the Middle East and China​;
• Further restructuring of operations and streamlining processes to continue its “costs out” agenda;
• Tailoring sales strategies to better serve customers;
• Expand supply base by leveraging strength in South America to secure “priority access” to quality livestock; and
• Exploring vertical integration in the long-term.

The business has already reduced overhead costs by AU$10m (US$7.5m) and Griffiths said he expected “further savings and efficiencies​” next year.

High cattle prices in Northern Australia dented Wellard’s competitiveness in key cattle markets like Indonesia and Vietnam this year. This has been the main reason for the company’s lowly performance in 2017. Lower prices have started to emerge from Australia’s southern herd, which could provide some respite. But this may not be enough to stop further restructuring, with the business hardly in a bullish short-term mood.

While a return to profit is still very dependent on how market conditions play out over the medium term, the board is confident that Wellard is on a path to improving its capacity to be leaner and better sized to meet the still tough market conditions,​” said Griffiths.

These factors I have mentioned lead us to have some cautious optimism in the medium term.​”

Related topics: Meat


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