Copied over from that previously running Timber! thread. Probably, more relevant to today's x2 announcements:
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Almost 2 1/2 months later comes confirmation of the news of the loss /termination of the ODFC JV termination. Back on 26/4, this was argued (on the Timber! thread):
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In between this however, ADF, ODFC have each been lost, the independent supermarket distributions haven't either rolled out or more the point, bulked up, the WOW transition has been a long time in the making (and is still not really there yet) and CDC plant utilisation is down well below 50% (arguably, much closer to 40% judging by the Company's more recent comments).
That's the sobering observation. Perhaps good, perhaps not - time will tell, here.
But as for the earlier announcement re: achieving all F18 KPIs, what is significant is the following statement from that announcement:
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This project (referring to the 24/4 contract), combined with several smaller contracts under negotiation with other established producers is projected to positively impact total plant utilisation at the Camperdown Dairy factory, while also utilising the specialist milk produced on Group farms.
The bolded words are of concern as they seem contrary to the observations that were previously being made:
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H18 report:
Despite the industry-wide changes underway, the Group’s combined farming and processing operations have been relatively positive on all fronts in comparison with modestly increased farm production in the Farming Operations and implementation of several new customer on-boarding in the Processing Operations to more than replace the processing business that has diminished during the 2017 year. The benefit of these new customers will be evident in the 2018/19 financial year.
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26/3/18
A key focus will be on expanding value adding opportunities for farms already in the process of applying for organic certification. As well as converting the farms to organic production, the board has started formal preliminary planning of a new wet blending spray drying plant and a pharmaceutical-grade tinning and labelling facility for the infant formula all on the same site.
Today's announcement should have also reflected /updated on the certification process and of the extent to which organic supplies will come from their own farms. At last count, ODFC had 17+ farms, 100% organic certified, as opposed to ADF's aspirational claim of this being a work in progress. It may well be happening, but the question is whether it will be with AHF's own milk or with 3rd party milk.
Finally, as for the performance hurdles having been achieved, @18c, the 3M award value is $480,000. For this, shareholders should be looking to significant gains having been reported. Thus far, they haven't been whilst instead, the following sounds ominously like a downgrade advisory:
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(a) replacing the declining dairy processing turnover inherited on the acquisition of the Camperdown Dairy business in March 2016 with new growth customers with value added innovative products and achieving new and substantial term supply contracts which will significantly improve profit margins and volumes.
That is, arguable downgrade /further weakening for F18 H2, but perhaps a status quo to recovering position by late F19, going into F20 (so, during C19+).
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