Beston Global Food Company forced to explain its survival plan after large loss

Dairy outfit Beston Global Food Company has gone into detail on its plans to survive another year after posting a record loss, on record revenue.

Beston has posted solid revenue increases, but is still struggling with large debts.

Beston Global Foods Company has delivered its largest ever loss since listing on the ASX and gone into detail about its plans to survive another year, while also reporting record sales revenue which climbed by a third.

The company, chaired by Roger Sexton, listed as a diversified agricultural group in late 2015 but has been whittling the business down to the core dairy business, based in South Australia in the past few years.

Beston on Thursday said it had made a net loss of $47.5m for the past financial year, with $29.8m of this coming from its decision to “derecognise’’ a deferred tax asset related to carry-forward losses.

Stripping out that figure, the company made a pre-tax loss of $19m, and a pre-tax loss from continuing operations of $11.6m, on revenue of $169.5m, up 33.7 per cent.

Beston has in the past had investments across sectors including seafood, meat, bottled water and technology, however has in latter years refocused on its core dairy business, and has its loss-making meat and water businesses currently up for sale.

The company said it had “achieved a significant improvement in the profitability of its dairy portfolio’’.

“The gross margins from continuous operations (dairy) were approximately $26m, up 175 per cent versus FY22 and the dairy trading EBITDA of $4.1m was significantly up versus FY22,’’ Beston told the ASX.

“In a significant achievement, the group’s trading EBITDA showed a substantial improvement of $14.5m compared to the previous fiscal year.

“This improvement is a result of our dedication to operational excellence and the successful implementation of strategic initiatives.

“Additionally, it’s worth noting that our operating cash position remained neutral during the latter half of the fiscal year, further affirming our commitment to financial stability and prudent resource management.’’

Chief executive Fabrizio Jorge said in a statement that the past year had been one of “extremes’’.

“In a testament of our resilience, we have managed volatility and delivered over $14.5m in trading EBITDA improvements versus FY22 and continued to take actions to accelerate our profitable growth by investing in our hero product lines such as the expansion of lactoferrin production and discontinuing our meat, water and technology businesses, which have impacted our performance in the past,’’ Mr Jorge said.

While the company was keen to talk up its advancements on the revenue front, it also addressed its ability to continue as a going concern in a lengthy addition to its accounts.

The company’s current and non-current borrowings sat at more than $45m at the end of the financial year, against total equity of $33.4m, putting its gearing level well above 100 per cent.

Beston raised $28.3m late last year, with $16m of this going to debt repayments, understood to have in part paid back the NAB, which is still a major debt holder.

The company included a “going concern’ statement in its financials, as it did the previous year, and indicated that there were several risks to its survival.

On the debt front, Beston said at the end of the financial year it had it had an invoice financing facility worth $10m, drawn to $9.4m, a fully drawn corporate markets loan of $18.5m, and a business overdraft facility of $18.7m, drawn to $9.8m.

“The expiry dates of these facilities were extended, effective 30 June 2023, to 31 July 2024,’’ the company said.

“In August the group established a new invoice finance facility of up to $25m with a 3-year term ... together with a $3m asset finance facility also on a 3-year term.

“Proceeds will be used to extinguish the existing invoice finance facility and fund scheduled

debt repayments.

“The group’s 12-month cashflow forecasts assume the continued availability of these or alternate facilities beyond 31 July 2024.

“The directors are confident of establishing or renewing sufficient debt facilities prior to expiry of the current facilities on 31 July 2024.’’

Beston said it had drawn up a cash flow forecast based on “reasonable economic, operating and trading performance assumptions’’, but flagged that the forecasts were dependent on securing necessary milk volumes at the prices it had used in internal forecasts.

“In the unlikely event that the group is unable to successfully extend or establish replacement debt facilities prior to 31 July 2024 either with its existing bankers or other financiers, if the generation of cash flows from operations does not improve as forecast, and the proceeds from disposal of non-dairy operations are not as budgeted, the existence of these conditions may cast significant doubt about the group’s ability to continue as a going concern,’’ the company said.

“In that case, the group may be required to realise its assets and extinguish its liabilities other than in the normal course of business and at amounts different to those stated in the financial

statements.’’

Beston said it was confident it would finalise the sale of its meat business before the end of the calendar year and was also expecting to close on the sale of its water business in coming months.

The company’s shares were trading 25 per cent higher at 1c at midday in Thursday. At Wednesday’s closing price the company was valued at $16m.