The board at its April meeting approved the budget for year ending 31 May 2017 with a forecast profit of $8m
This compares to an expected net loss of $18.5m for FY16 (FY15 net loss $11.4m). The losses were driven by decreased sugar prices and unfavourable harvest conditions. Please refer to prior notes
for full details.
The budget was based on a crop estimate of 5.4 million tonnes and a sugar price of $434 per IPS/tonne in Mackay, and a crop of 1.2 million tonnes and a sugar price of $436 IPS/tonne in Mossman.
In finalising the budget, all aspects of the business were examined to reduce the overall cost base by $10m. Reductions in staffing have already been implemented with 34 positions removed from the company. Shed meetings have recently been held with growers to advise on extended hours of harvesting to be implemented this crushing season. This initiative will reduce manning in cane supply by four locomotive shifts. The board states it will continue to focus on the stay in business capital and maintenance program to ensure the reliability of mills is maintained.
Mackay Sugar (MS) is a cyclical business with a long trading history and has managed through similar difficult periods before. Most importantly, MS has a significant asset base in marketable, easily divestible assets and many options to sell or monetise assets as needed. MS has property, plant and equipment with a book value of $321m, $140m in associated investments and a net asset position of $295m at 1H16.
The group’s recent Sugar Terminals Limited shares transaction which generated $26.5m is an example of its ability to monetise assets as needed.
The group’s full market update can be viewed here.