Beston Global Foods has posted another big loss, as a $10m share placement goes south

Beston Global Foods says it has a strategy to continue as a going concern, after posting a large full year loss.

Beston has increased revenues, but it’s not translating to profitability.

Beston Global Foods says it will need the support of its bankers and the successful completion of its capital management plan to continue as a going concern, after posting a loss of more than $20m.

The company also said a $10m share placement with Thailand’s KCG Corporation, announced in June, had been withdrawn by Beston, with several matters surrounding a related product supply agreement remaining unresolved.

The Adelaide-based cheese and meat company on Wednesday posted a net loss of $21.7m, marginally down on last year’s $21.9m loss, on revenues of $139.9m, up 24.3 per cent.

Some of the factors involved in its poor performance included a 300 per cent jump in shipping costs, a “dramatic reduction” in food service sales related to the pandemic, and a decline in birthrates due to the pandemic putting a dent in lactoferrin sales.

Beston said its financial report lodged with the ASX on Wednesday was based on accounts “which are in the process of being audited and are likely to contain an independent audit report that is subject to an unqualified opinion, with emphasis of matter relating to going concern’’.

The company noted in the report that its current assets of $37.3m were just $0.9m higher than its current liabilities. The company had $322,000 in cash at the end of the financial year, along with $18.8m in trade and receivables and $18.1m in inventories.

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The report says the directors consider that for Beston to continue as a going concern, it will require the generation of sufficient funds from operating activities to meet its financial obligations, the continued support of its bankers and suppliers, and the successful completion of its capital management and funding activities.

“The company is currently involved in discussing a range of options for funding some of the remaining projects on our ‘Priority Projects’ list and increasing the company’s working capital to the level which directors believe is appropriate to support the company’s growing profitability (including by securing additional milk volume) whilst also reducing

gearing and managing the ongoing volatility inherent in the dairy industry and in global supply chains at the present time,’’ the report says.

“At the date of this report and having considered the above factors, the directors believe the group will continue as a going concern.

“However, if the group is unable to successfully implement the capital management plan as described above and/or generate sufficient cash flows from operations and/or the financial support of its bankers is not available, material uncertainty would exist in relation to the group’s ability to continue as a going concern.’’

On the debt front, the company said it had a $41.8m loan facility expiring in August next year, which was drawn to $39.5m at the end of June.

Beston told the ASX it was EBITDA and cash flow positive for the last quarter of the financial year, and said that the momentum had continued into the current year.

“The company made a number of operational and management changes during FY22 which resulted in substantial improvements in margins, profits, and cash flows during Q4 including the appointments of Fabrizio Jorge as chief executive officer and Cameron Woods as director, food and beverages business unit,’’ the company said.

“These changes have been critical in enabling the company to cope with the challenges to the

business presented by the impacts of Covid and the significant increases in input costs which arose from geopolitical events and other unexpected events.’’

Mr Jorge said the company was “confident that Beston is in a better position than at any

time in the last three years and is very well placed to continue its positive growth

trajectory in revenues, margins and profits”.

Beston shares were 2.9 per cent higher at 7c in afternoon trade on Wednesday. The company’s market capitalisation is about $60m.