by Brad Thompson Livestock exporter Wellard sees a softening in heavy cattle prices as an opportunity to boost shipments to China but remains wary of paper-thin margins in the trade out of Australia.
It is also trying to revive sheep exports to customers in the Middle East and has raised the prospect of long-closed markets in the region re-opening to Australia. Wellard, one of the worst floats of 2016, continues to operate at a loss but has stemmed the bleeding by cutting costs and scaling back its exposure in Australia.
The strategy of chartering its two biggest livestock carriers to cattle exporters in South America helped to reduce net loss after tax to $7.5 million in the six months to December 31, down from $17.9 million a year ago.
Wellard used the $32.9 million sale of another vessel, the Ocean Outback, to pay down associated debt and for operating expenses.
Executive director of operations Fred Troncone said Wellard would continue with the lower risk approach, which reduced revenue by more than 40 per cent to $163.7 million but improved earnings before interest, tax, depreciation and amortisation by $16.9 million to $8 million.
The company's cattle exports fell by 46 per cent on the same period last year and the number of sheep processed at its abattoir in rural Western Australia fell by 27 per cent.
Wellard has consistently blamed high cattle prices in Australia for its horror run in the two years since an initial public offering that raised close to $300 million.
Wellard shares closed flat at 14.5¢, well below the $1.39 per share investors paid as part if its IPO.
Mr Troncone said a downward trend in heavy cattle prices offered some hope but warned that exporting out of Australia remained challenging.
The eastern young cattle indicator for January was 15 per cent lower than at the same time last year, but the big test of cattle prices and supply will come at the end of the wet season in northern Australia.
Wellard made its first shipment of about 2000 slaughter cattle to China in November and hopes to build the trade if prices remain lower.
It has a contract to ship 10,000 dairy cattle to China before June 30 and is increasing efforts to revive sheep shipments to the Middle East.
Wellard has been inactive in the Middle East for some time but once exported hundreds of thousands of sheep a year to the region.
Mr Troncone said he was keen to resume shipments to the Middle East where trade is complicated by Australia's animal welfare regulations and their application on foreign soil.
"What it does give you is not only market diversification but species diversification," he said.
"When I look back to the days when this company was most successful, we did have a good spread of risk across multiple markets and multiple species. I think we need to get back to that.
"There has been talk of markets such as Iran and Iraq opening up for quite some time and there are rumours in the industry that the Saudi market may re-open."
Australia exported more than 1.6 million sheep last year with sales to Kuwait and Qatar dominating the trade.
A restructuring deal in September saw Mr Troncone take over the running of Wellard from former owner Mauro Balzarini. Mr Balzarini remains chief executive with his departure tied to the conclusion of a refinancing deal with Intesa.
