Questions answered. Front foot initiative. So, score this as a plus to management.
The $1 milk issue was well known and had previously been ventilated by management. The H18 results (particularly for CDC) also partially reflected this.
Going forward, the budgeted exposure is stated as follows:
"In the Group’s current budget forecasts for the ensuing 12 months the budgeted sales to Aussie Farmers Direct accounted for less than 5% of total sales expected."
What's not explained is if this refers to the (*) CDC segment only, so circa $12.4M if H18 annualised (excluding any on-boarding of customers), or the (*) whole of business segment, in which case, circa $21.25M if using H18 annualised.
Add in for 5% growth (an estimate), and the figures here would become:
- CDC = $13.0M (so, if AFD @5%, then $651,000, or ~$54,000 monthly). The AFD exposure of $90,000, assuming this approach, therefore infers ~7 weeks of trading.
- AHF (whole) = 22.3M (so, if AFD @5%, then $1.12M, or ~$93,000 monthly). The AFD exposure of $90,000, assuming this approach, therefore infers one month's worth of trading.
Most of the loss however would have been in reference to the higher yielding products with yoghurt as the primary example here.
So, whilst not a material impact (depending upon which analysis is applied), the hit to CDC (already down by a considerable extent), particularly in the higher margin areas, remains concerning. CDC is still in decline at the moment and the risk of impairment (NWS the H18 results) remains real. If the on-boarding of customers either (*) does not replace already crest fallen revenue, or (*) grow the business segment, or (*) reinflate CDC's operating margins quite soon (before F18 is due), then the impairment risk will accelerate, not abate.
The immediate, past driven exposure is minimal (that's correct, based on the announcement made), but the future focused exposure remains to be seen as now they have to replace either a $650K customer or a $1.120M customer which was now apparently functioning in the higher yielding segments of the supply offering (refer, ASX 24/10 re: yoghurt supply)
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