Murray River Organics pins hopes on latest capital share raising

Struggling dried fruit producer Murray River Organics is hoping to raise more than $20 million to help turnaround its ailing fortunes.

Ailing ASX-listed Victorian dried fruit producer Murray River Organics expects to launch an equity capital raising before the end of January to raise at least $20 million to allow it to progress with this year’s harvest.

A SUNRAYSIA dried fruit producer once tipped to be a market darling is hoping to raise $20 million before the end of the month to see out this year’s harvest and stem losses tallying almost $72 million in the past two years.

Murray River Organics is expected to issue a prospectus later this week to sell its latest equity capital raising plan.

The funds, which are hoped to exceed $20 million, are needed to pay for ordinary business operations including the picking of this year’s fruit crop, and paying out its landlord $1.32 million after it terminated a 25-year “non-cancellable” lease last month, just three years into the agreement for the Colignan farm, near Mildura, one of Sunraysia’s biggest dried fruit powerhouses with some 620 hectares of vines.

Colignan is the only one of its four farms MRO doesn’t own. The annual lease payments are hidden on annual reports, but are believed to be significant, and the lease signed with landlord Arrow Funds Management, an agricultural property fund, not long before MRO was listed on the ASX in 2017 appears weighted in Arrow’s investors’ favour.

It contains a clause currently being disputed that makes MRO liable for all payments relating to new farm infrastructure.

“It’s a significant financial obligation,” MRO chief executive Valentina Tripp told The Weekly Times, and the burden had been heightened by hotter and drier weather for this year’s harvest, reducing yields, not to mention spot water prices that reached $950/ML.

“The capital requirement to continue to fund the farm turnaround was significant, and this frees us up to continue to invest in other farm assets and the broader business,” Ms Tripp said.

The vertically integrated producer revealed in November it was experiencing several “headwinds”, most notably a significant increase in water costs. Other financial hurdles included major and ongoing remediation work at three of its four farms, higher processing costs owing to “tough” growing conditions last year and lower citrus prices due to poor weather early last year.

As a result, it’s guidance for the 2019-20 financial year was revised in November to a loss of $5-$8 million, compared to a previous forecast of a loss of $1-$3 million.

But it’s only one-year into its three-year turnaround, a point Ms Tripp is urging shareholders to consider.

When MRO floated in December 2016 at $1.40, many hoped it would mirror the success of fellow Australian organic company Bellamy’s Organic’s. But a year on, and founders Jamie Nemtsas and Erling Sorensen had stepped down as chief executive and chief operating officer, and the board was ousted after multiple earnings downgrades and an ensuing crash in its share price to 40c.

Before a trading halt was announced in November last year, shares were selling for 5 cents.

But Ms Tripp – who was appointed in April 2018, having come from Simplot where she was executive director – said significant growth has been achieved in the past year, including new farming models, the launch of 15 new products, new sales, procurement and marketing teams and improved table grape yields.

The turnaround “has only just began,” she said.