OVERVIEW
********
Food products are enhanced when things are tough because that's
the last sector you cut down on, even confectionery.
Buderim Ginger Ltd (ASX:BUG) is one company holding up against
falling consumer demand.
The Queensland ginger product maker which has also diversified
into nuts, looks strong and well, judging by the chairman's remarks at
the extraordinary general meeting on Friday in which he said that the
company's expectations for the year to December 31 remain unchanged.
In August, chairman John Ruscoe said that the company had revised
its full-year profit forecast upwards after sealing a deal that will make
the food company potentially the world's largest processor and marketer
of macadamia nuts.
The acquisition will enable the company to increase its 2008
profit forecast as a result of both incremental operating profit and
business combination benefits on acquisition.
In response to a subsequent request from the ASX, directors
advised that profit before tax for 2008 is expected to be in the range of
$3 million to $3.5 million, well above the $900,000 result achieved in
2007 and also strongly up on the guidance given last week when the
company announced a forecast of un-audited half-year results.
Back at the EGM, the chairman told shareholders there was a
determined need for additional equity to support recent strategic
acquisitions and to prepare for further expansion, as well as to
strengthen the company's balance sheet.
"As you are all aware, during the last 10 months the company
purchased the assets of Agrimac Macadamias, based in Alstonville NSW, and
those of MacFarms of Hawaii making us arguably the largest processor and
marketer of macadamias in the world in an industry that holds enormous
growth potential.
"We have done this at what we believe to have been an opportune
time in the business cycle and, in the case of MacFarms, at a very
favourable time in terms of exchange rate.
"We intend to capitalise on the many synergies between these
businesses and with our core ginger business, leveraging in areas such as
customer base, geographic penetration, distribution, sales and marketing,
manufacturing, logistics and of course our expertise in agriculture," Mr
Ruscoe declared.
Over the next few months, the company is undertaking a major
expansion at its bakery at Kunda Park, near Buderim, as well as making
further modest investment in its tourism operations in Yandina.
Buderim Ginger has, within the last week, opened its cooking
school which is still in construction phase of a purpose-built facility
to re-establish the "Superbee" attraction on the Sunshine Coast,
following its closure at the former site earlier this year.
"So far, we have financed our investments through cashflow and
borrowings, but it is now time to raise additional capital," the chairman
said, adding that the instability in financial markets which has been so
manifest in recent weeks makes this prudent as well as practical.
Although the present volatility makes forecasting in the short
term extremely difficult, the company believes that the broadening of its
business base makes it both a larger and more resilient company and
positions it for future profitable growth.
"The economic turmoil of recent months clearly has implications
for our business," Mr Ruscoe said.
"There are a number of factors affecting us.
"The spectacular decline of the $A obviously has longer-term
benefits for our export focused businesses.
"It is also impacting (sic) on the value of our recent US
investment and will eventually act as a spur to increased domestic
tourism - the 'bread and butter' of our tourism business.
"Food price inflation is also expected to be strong for some time
to come," the chairman said.
However, he added that reduced consumer discretionary spend will
have an impact on some of its business and the company is already seeing
effects of this, particularly in the UK, and in demand for premium pastry
products domestically.
"In response, we are reviewing each of our businesses and
tightening expenditure where appropriate.
"At this time, it is too soon to quantify any potential overall
impact on the business, but we remain confident in our existing market
advice for 2008," Mr Ruscoe concluded.
Back in September, Buderim Ginger reported that its share
purchase plan (SPP) and associated placement program had been
successfully completed.
A total of $3,866,746, of new equity was raised, in line with the
company's target of $4 million.
Mr Ruscoe said at the time the Board was delighted with the
response received, especially in light of the turmoil in equity markets.
"We believe it is a strong vote of confidence in our specialty
foods strategy which is now delivering results."
Given the strong response, the 15 per cent equity threshold was
exceeded.
The issue of all placement shares was approved by shareholders at
the EGM, allowing for 7,033,556 shares to be issued on November 7.
SHARE PRICE MOVEMENTS
*********************
Shares of Buderim Ginger on Friday traded steady at 42.5c.
Rolling high for the year is 59.5c and low 40.5c. Dividend is 2c to yield
4.71 per cent. EPS is 3.17c and p/e ratio 13.41. The company has 30.6
million shares on issue with a market cap of $13 million.
Buderim Ginger's website has made these observations about its
product.
For over 5,000 years ginger was revered as the "universal
medicine" by the ancient Orientals of China and India and highly sought
after by spice traders.
Today, ginger remains a component of more than 50 per cent of the
traditional herbal remedies and has been used, over the centuries, to
treat nausea, indigestion, fever and infection and to promote vitality
and longevity.
It is claimed that Ginger can save tens of thousands of lives and
billions of dollars in lost workdays. The world's favourite spice is
reputed to have qualities that may prevent heart attacks, arthritis pain,
aid digestion, prevent colds and flu, skin cancers and aid weight loss.
Confucius and Pliny praised it, Nostradamus included recipes for
wine and ginger preserved in honey and the Koran speaks of a fountain of
ginger flavoured water.
British University's Professor Roger Collier developed a ginger
and garlic cocktail which he claims thins the blood, dissolves clots and
lowers blood pressure.
Further, these tests showed that ginger cuts down on bad UDL and
raises good HDL cholesterol, contains no fat or sugar and can be added to
foods to heighten flavour without adding calories.
BACKGROUND
**********
Buderim Ginger joined the Australian Stock Exchange list on
December 14, 1989.
But its history has stretched much longer than that.
Not long before World War 1, some pieces of raw ginger found
their way to Buderim - which was then a small farming area about 100km
north of Brisbane, where the comparatively high rainfall and humidity
combined to produce conditions which were ideal for growing this unusual
crop.
The interruption to the supply of ginger from China, caused by
World War 2, provided the opportunity for growers in the Buderim area to
expand their sales.
As a result of this, five Buderim farmers met together in an old
blacksmith's shop and formed The Buderim Ginger Grower's Co-operative
Association Ltd. Between them they had capital of 25 pounds, two wooden
vats and 14 tons of green ginger.
In 1979 an area of nearly nine hectares was leased from the
Department of Commercial & Industrial Development and the first stage of
a new factory complex was commenced, being opened in time to help in
processing the 1980 early harvest.
The establishment of the Tourist and Administrative Complex in
Yandina during 1985 completed the industry's relocation program. In 1989,
Buderim Ginger Ltd was listed on the stock exchange.
Through out the 1990s, and into the current decade, Buderim
Ginger has become globally recognised for producing the world's finest
ginger.
This has been achieved by investing in production facilities and
meeting the needs of customers in overseas markets, from the UK to the
USA and from Japan to New Zealand. In Fact Buderim Ginger exports to over
17 countries.
This distribution success has been greatly enhanced by opening
offices in the UK, Germany, the US and agents in Japan, New Zealand and
Singapore.
Sydney - Monday - November 3: (RWE Aust Business News)
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