Murray River Group is struggling with the after-shocks of a business in turmoil, as it reports a $22.2 million half-year loss.

The organic fruit grower (ASX:MRG) blamed the December half result on four issues:

  • Stock shortages causing bad service for key customers.
  • Lower margins as some fruit was sold into price-conscious and uncontracted markets.
  • Delays in the start of a new high speed snack box packing line at the Dandenong manufacturing facility.
  • Slower than expected commissioning of the new Sunraysia processing facility.

That loss did include costs associated with restructuring the company and write downs, however.

Murray River reported $21.1 million in expenses relating to “inventory write-downs of $8.3 million, goodwill impairment of $10.4 million, restructuring costs of $1.4 million and reversal of provision for group reorganisation $1 million”.

Murray River has been plagued by board room and operational problems over the past 12 months.

A boardroom spill by the two ousted founders coincided with a second sales downgrade — the first was accompanied by a $4.3 million write down of inventory.

Farming is a high stress business. As has following Murray River shares since its spectacular fall from grace in August 2017.
Farming is a high stress business. As has following Murray River shares since its spectacular fall from grace in August 2017.

Half-year revenue rose 136 per cent to $39.4 million, due in part to two acquisitions made in 2016.

The company had $2.8 million in cash at the end of December, a big reduction from the $11 million it finished 2016 with just after listing.

“Financial performance of MRG was disappointing in the first half,” CEO George Haggar said.

“Notwithstanding the one-off costs which we have brought to book, we are particularly disappointed with the poor margins across the commodity and bulk segments.”

A corporate review has led to “important changes” being made to the supply chain.

“While the initial effort has been to focus on people, process and systems, the business will continue to move through a turnaround and consolidation phase over the coming months.”

The company says it will update its pricing models; re-vamp the post-harvest supply chain; as supply contracts come up for renewal, try to add some competitive tension to the negotiations; use the new equipment; and build a plan for local and global sales.

Murray River shares fell 3 per cent on Tuesday to 38c.

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