Wellard has recorded its best full-year earnings of $23.3 million for the 2020 financial year and recorded its first full-year financial profit since listing on the ASX.
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The company recorded a modest net profit after tax of $200,000, but combined with almost doubling its earnings, reducing debt by $103m - or 92 per cent year-on-year - and still retaining $16.8m cash on hand at the end of the financial year, the company is in a far better financial position now than it was 12 months ago, according to its executive chairman John Klepec.
"The changes we have made to Wellard's debt structure, operating base and business strategy have begun to yield results," Mr Klepec said.
"While we would have preferred a higher net profit after tax, it was a good result given the global COVID-19 disruptions during the second half.
"More importantly it demonstrates a positive trend over the past three years, and we are heading in the right direction.
"With low debt, a healthy cash balance, reduced cost base and a reasonable order book of charter activity in the near term, the company has started the 2021 financial year in a robust position."
Mr Klepec said they had completed the balance sheet restructure to provide greater financial resilience and the company was in "full compliance with all of its financial covenants".
The company's move away from exporting livestock to focus on being a charter business reduced revenue from $235.1m to $87.6m, but at the same time its gross profit margin almost doubled from 16.5 per cent to 31.8pc with the transition in business activity.
Mr Klepec said "we are getting better stability into our earnings and with the balance sheet restructure now completed, our interest bill has been reduced considerably".
"This is already enabling better conversion of revenue into profit for shareholders," he said.
"Our fleet is now right sized for the current market conditions, so although the fleet is smaller the company is more financially resilient with a more robust balance sheet and better fleet utilisation.
"This places us in a good position to capture sustainable growth opportunities.
"Importantly our cost reductions have not come at the expense of animal welfare outcomes and ongoing maintenance of the fleet, with management focussed on both these key success indicators."
Selling off the Ocean Shearer for US$53 million, as well as selling and leasing back the Ocean Swagman enabled the company to pay off both ship debt and corporate noteholders to reduce its debt from $85.5m on December 31, 2019, to just $8.9m on June 30, 2020.
Nearly all the debt is now shipping finance and the ship loan to asset book value ratio has improved from 61.9pc a year ago to 37.6pc at the end of the reporting period.
Wellard said the outlook for 2021 was good with "all available tonnage chartered" for the first quarter, although the MV Ocean Ute has commenced six weeks of planned dry dock in August.
The company also has a "good pipeline of both confirmed charters and opportunities for the second quarter".
Chinese demand for Australian and New Zealand dairy and beef breeding cattle was a large contributor to Wellard's vessels' activity in 2019-2020 and shows no signs of slowing, the company said.
Wellard expects to continue servicing that market and sees an opportunity transporting breeding stock from South America to China.
The Ocean Swagman is close to completing a successful charter from Chile to China.
Vietnam and Indonesia continue to be important markets for the company although with Australian cattle prices highest in the world, it has become more competitive there and uncertain, as buyers source cheaper protein options.
Wellard said it had a strong position in this market and was intent on defending and even growing that position.
Its key South America to Turkey trade was still uncertain with only import permits for small shipments of cattle being released.
The company hopes that it can deploy the Ocean Drover to Turkey if more permits for larger numbers become available.
Wellard said it loaded 335,250 head of cattle during the financial year and recorded a 99.9pc delivery success rate (334,882), while 95,360 sheep were loaded and a 99.8pc delivery success rate was recorded - 95,164 head.
Because of the change in company direction from livestock trading to livestock logistics services, and the consequent refocus on the chartering activity of its Singapore-based subsidiaries, nearly all of its revenue and expenses have been carried out in US dollars.
The board has therefore agreed to change its presentation currency of its financial information to US dollars going forward.
The board believes the change in the reporting currency will provide shareholders with a more accurate reflection of Wellard's underlying performance, while reducing the impact of currency fluctuations.
