Trucking giant ScottsRL collapses, 1500 jobs and supermarket supplies threatened
Talks are underway to save 1500 jobs and ensure shelves remain stocked after the administration of one of Australia’s biggest trucking companies.
A major supplier to Australia’s biggest supermarkets has been plunged into receivership, putting 1500 jobs at risk and threatening the delivery of food supplies.
One of the country’s biggest trucking companies, Scott’s Refrigerated Logistics supplies all major supermarkets, including Woolworths, Coles, IGA and Aldi, as well as Foodbank Australia. It is understood the company has engaged in high-level talks with grocery executives about its collapse.
While the company’s trucks will keep delivering food to supermarkets for now, supplies could be put at risk if a rescue deal cannot be hatched.
It is hoped a buyer can be found for the business, which employs 1500 staff plus subcontractors and has 24 cold storage warehouses in all mainland states. It is understood supermarkets are engaged closely in the process to keep stock flowing.
A spokesman for Coles said: “We’re aware of the challenges being faced by one of our transport providers and we are working hard to provide support and minimise the impact this might have on customers and product suppliers.”
Supply chain disruptions from pandemic-fuelled labour shortages and wild weather have been key drivers of grocery inflation as well as stock shortages. It is expected ScottsRL’s collapse will be one of many this year as the Reserve Bank’s nine consecutive interest rate hikes begin to bite.
Private equity firm Anchorage Capital Partners bought ScottsRL and its fleet of 500 trucks and 450 rail containers in mid-2020 from ASX-listed car dealer AP Eagers.
It appointed McGrathNicol as administrator on Monday afternoon. The move comes two months after Anchorage bought David Jones – Australia’s highest-profile department store – from South Africa’s Woolworths Holdings for $100m.
Soon after Anchorage engaged McGrathNicol, ScottsRL’s secured creditors appointed Melbourne-based insolvency firm KordaMentha as receivers.
KordaMentha’s Scott Langdon said an “orderly sales process” for ScottsRL would begin immediately. “We anticipate a high level of interest in this business and its assets, given its significance in the cold chain supply system in Australia,” he said.
“We are seeking support from all customers to give the business the best chance of being sold to a new long-term owner.”
When Anchorage bought the company, ScottsRL chairman Phil Cave, whom the private equity firm appointed, said the acquisition “reflects confidence in the ScottsRL business and its future potential”.
“We are committed to supporting and investing in the business to improve and grow ScottsRL’s operations,” he said at the time. Mr Cave represents Anchorage on ScottsRL’s board with Simon Woodhouse.
Anchorage describes itself as a private equity firm that focuses on investing in companies with “strong and established track records but are operating below their full potential”.
ScottsRL’s collapse comes amid a boom time for logistics operators, which are in high demand, and as input costs such as fuel fall.
Woolworths chief executive Brad Banducci last week said cost inflation across supply chains remained “material and well above recent history”.
“Our current priority is to assist our customers and team impacted by the devastating recent weather events but pleasingly our supply chain remains in reasonable shape with stock continuing to flow to our stores,” Mr Banducci said.
Coles chief executive Steve Cain said the company was working with its suppliers and state and federal governments to “improve food supply chain resilience for all Australians”.
“Many of our suppliers are still facing increasing cost pressures and shortages of pallets, raw materials and labour,” Mr Cain said at Coles’ interim financial results last week.
According to CreditorWatch, business to business receivables are at their lowest point since it began collecting data in 2015 and external administrations are expected to continue trending upward this year as businesses come under pressure from the Reserve Bank’s aggressive interest rate hikes.
CreditorWatch chief executive Patrick Coghlan said trade payment defaults are up 39 per cent year-on-year, while credit inquiries have surged 129 per cent, indicating a tough year ahead for businesses.
“The upward trend in trade payment defaults, in particular, should definitely be of concern to business owners,” Mr Coghlan said.
“The RBA’s tightening of monetary policy is beginning to bite, on top of other challenges like labour shortages and supply chain disruptions. We will hopefully see inflation peaking soon, followed by an improvement in business and consumer confidence. It is important to remember that the Australian economy is still in a much better position than most.”
CreditorWatch chief economist, Anneke Thompson, said the high trade receivables and trade default data provided a strong indication that “we are now well past the peak of business conditions”.
“One of the likely results of this slowing of business activity is rising unemployment. Again, employment conditions have been extremely tight, so any rise in the unemployment rate will likely still see the rate at very low levels in overall terms,” Ms Thompson said.
“It will also dampen wage growth, something the RBA Is very keen to keep at moderate levels so as not to induce a wage-price spiral.”
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