The sale of Freedom Foods Group’s Cereals and Snacks business to The Arnott’s group has been completed. The sale was announced in December, just weeks after reporting on its “deeply disappointing” FY20 $175 million loss.
FFG CEO Michael Perich said the sale was part of its simplified business strategy to focus on “the brands and products with the greatest potential in our Dairy and Nutritionals and Plant-based Beverages business”.
Freedom Foods’ revenue drops 10.7% in Q3
Freedom Foods Group has reported $141.6 million revenue in Q3 FY21, a 10.7 per cent fall of $17 million. The company said the quarter-on-quarter fall was broadly in line with its expectations.
- total revenue $141.6m, down $17m or 10.7% QoQ;
- Dairy and Nutritionals revenue $91.5m, down $16.7m or 15.2% - down on company expectations;
- Plant-based Beverages revenue $37.3m, up $2.4m or 7% - up on company expectations;
- Speciality Seafoods revenue $2.9m, down $0.5m or 13.7% - down on company expectations;
- Cereals and Snacks revenue $10.3m, down $1.7m or 14% - down on company expectations;
- Company’s cash position $20.6m; and
- recapitalisation plan announced 19 March, trading recommenced 22 March.
UHT dairy sales in the domestic market were down due to private label milk run rates being softer than the prior quarter.
Its consumer nutritionals like Crankt were in line with Q2, but sales of nutritionals ingredients, mainly lactoferrin, were down.
The business’ focus is on reducing waste, improving production efficiencies, removing unprofitable products, optimising milk supply and curtailing losses from the sale of surplus milk.
Plant-based beverages had strong category growth and Milklab sales were up due to increased distribution in the out-of-home channel and export.
The group had $333.9 million of available finance facilities at Q3 close with $331.9 million drawn.
In Q3, almost $4.5m was paid to people and companies associated with the Perich Family.
Extraordinary general meeting called
FFG will hold an extraordinary general meeting on 25 May at 10am. The company said it will seek several inter-conditional approvals for certain features of the recapitalisation, that was announced on 19 March.
Two of the 13 resolutions being considered include:
- Resolution 1: the issuance of notes to Arrovest and the ability of Arrovest to convert those notes into shares; and
- Resolution 2: the issuance of notes under the wholesale investor offer, and the ability to convert those notes into shares.
The board has recommended shareholders vote in favour of Resolution 1, even though the independent expert concluded the proposed issue of shares to majority shareholder, and investment vehicle for the Perich family, Arrovest on conversion of the notes was “not fair but reasonable” to the non-associated shareholders. Considering there was no “superior alternative proposal emerging” the advantages of voting for the resolution outweighed the disadvantages of rejecting it.
The capital raising includes:
- a wholesale investor offer of up to $130 million notes to eligible investors; and
- a placement of $200 million notes to Arrovest, subject to the company having the ability to scale back Arrovest’s investment to a minimum of $135 million, depending on the level of participation in the wholesale investor offer.
The wholesale investor offer is expected to close on Friday (7 May). Depending on the level of participation, FFG has agreed to use between $183 million and $233 million of the proceeds towards repaying its existing senior term, revolving debt and subordinated facility.
The Board said it strongly believes the issue of notes is the preferred capital raising structure.