Alliance has announced a capital raise program for farmer shareholders following a $70 million financial loss in the year ending in September 2023.
Its CEO Willie Wiese explains the tough yet necessary decision to call upon farmer shareholders for a capital raise, emphasising the importance of supporting the livestock farming industry, which is fundamental to Alliance's operations.
"No, it was definitely not a straightforward one," Wiese reveals when asked about the capital raise from farmer shareholders.
The company's awareness of the farmers' own struggles was considered, showing an understanding of the wider economic pressures within the agricultural sector. The CEO outlines several initiatives to enhance operational efficiency, including increasing sales velocity, reducing inventory levels, and exploring new market strategies.
These efforts are aimed at improving cash management and bolstering the company's balance sheet. Despite the previous nine profitable years, the recent loss necessitated a significant capital injection, highlighting the slim margins within which the company operates.
"There's been a number of events that has actually led to reducing equity and cash availability," Wiese points out, listing the ERP program, COVID-19, and changing lender appetites as contributing factors to the company's financial woes.
He insists that the financial recovery plan is not just a response to the previous year's loss but a strategic move to strengthen the balance sheet for more sustainable and profitable operations, ultimately benefiting the farmers. Discussing the capital raise mechanism, Wiese clarifies that farmers join Alliance by paying a fee and then share up to a level commensurate with their livestock supply.
The company aims to expedite the sharing up process to create a more equitable system among its shareholders. Additionally, Alliance has decided to increase supplier premiums as a reward for loyal suppliers, a move Wiese justifies by saying, "Without the large stock supply, we don't have a business."
Wiese expresses hope that the company will not lose farmers due to the financial recovery actions but acknowledges the risk of "some leakage." He underscores the company's competitive offerings and value proposition to retain shareholders.
Listen to the full chat between Willie Wiese and Dominic George above.
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