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.
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.
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“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.