Freedom Foods Group managing director and CEO Rory Macleod has taken leave pending a further announcement in news that has shocked the market. It comes a day after its CFO and company secretary Campbell Nicholas resigned.
UPDATE: The company has requested a trading halt pending a financial performance update. The halt is in place until the morning of Friday 26 June.
A follow-up statement is expected early next week. Shares fell 16 per cent to $2.95 following the news.
Commercial director Brendan Radford has been appointed acting CEO by the board. Radford has 18 years FMGC experience and was formerly MD Australasia of Rockstar Energy Drink.
Group general manager corporate development Stephanie Graham is acting CFO.
Non-executive director Trevor Allen has been appointed company secretary with immediate effect.
In a 29 May trading update, Macleod said the company was “reshaping” its commercial and organisational structures to reflect the company’s new operational footprint and key products, channels and markets.
In the last four years Freedom Foods has invested $430 million in capital expenditure, with a key component of that being construction of new nutritionals capabilities and a 500 million litre capacity expansion at its Shepparton plant.
Macleod said its Shepparton operation was transitioning from the completion of a significant capital expenditure period, relocating all external warehouse and logistics functions to an integrated on-site operation, including the commencement of an on-site container management function to facilitate further export growth underway.
Internalisation of other external warehousing relating to Cereal, Snacks and Specialty Seafood businesses was also happening.
But there have been redundancies across the business.
Macleod said: “The company has also progressed a reshaping of its commercial and organisational structures to reflect the new operational footprint and key products, channels and markets.
“These changes also reflect a requirement to remain agile in our response to the markets in which we operate and ensure we can adapt quickly to changing circumstances.”
He said the group expects to realise material cash cost savings into FY 2021 from the changes, with one off costs associated with the closure of external warehousing facilities and redundancies to be expensed in FY2020.
Macleod said he had decided to forego his entitlement to his options incentive plan as part of the company’s response to its trading performance.
In the grocery channel the company experienced strong growth above its pre COVID-19 plan which normalised during May.
While out of home and industrial channels were hit during the pandemic, the company said they were showing tentative signs of recovery.
Its deal with McDonalds to secure national ranging for its MILKLAB brand would see increased sales and exposure from July, it said.
Sales to China, which account for about 17 per cent of net sales, recorded a 30 per cent decline in 3Q20.
Demand for its dairy nutritionals remained largely in line with projections, with increased demand for its lactoferrin product PUREnFERRIN. The company has contracted roughly 80 per cent of planned FY2021 output, including supply of lactoferrin under a long-term agreement with a major global pharmaceutical company.
Macleod said the company has historically experienced low levels of provisioning for doubtful debts. It is expected that a provision of approximately $4 million will be required to be created in 2H FY2020 in respect of an export account.
The company did not foresee any other material doubtful debts in its export markets.
The second half of the financial year is typically a significant sales and margin contributor to the overall result for the group: normally contributing more than 60 per cent of full year operating EBITDA.
But Macleod said for FY2020, the combination of the level of sales, changed sales mix from March to June, the impact of doubtful debts and an unrecovered higher seasonal milk pricing will materially impact the second half operating EBITDA relative to pre COVID 19 plans.