MAINBOARD-LISTED food supplier QAF expects its Australia-based pork production business to fare slightly worse in FY2020 than earlier guided, it said on Tuesday night.

 

Meanwhile, it has not yet received offers for meat producer Rivalea and the rest of its Australian primary production business as has been reported in the press, the company said, in an update on a sale process launched in August.

 

Rivalea has projected net revenue of A$395 million, down from a guidance of A$404 million announced on June 30, said QAF' s latest bourse filing. Earnings before interest, taxes, depreciation, and amortisation (Ebitda) could come to A$36 million, excluding fair-value changes on biological assets, against the guidance for A$38 million.

 

" The updated FY2020 projections are nevertheless higher than the FY2019 net revenues and Ebitda of A$384 million and A$21.1 million," QAF said.

 

But the projections factor in assumptions about sales volumes, selling prices and feed costs, even as the impact of the Covid-19 pandemic in Australia is evolving, it warned.

 

" As the Covid-19 pandemic is an unprecedented event and the situation is evolving, the impact cannot be reliably estimated with certainty at this point in time. Losses arising from the pandemic are not covered by insurance policies in Australia," it said.

 

Primary production is QAF' s second-largest business segment, after the bakery division, which includes bread manufacturer Gardenia Singapore.

 

The net book value of the pork production assets that QAF plans to sell off came up to some A$160 million, including shareholder loans, but excluding net external debt, based on unaudited management accounts as at Aug 31.

 

QAF described the sale process for Rivalea as being " in its preliminary stages" , and said that reports in the newspaper The Australian - which claimed that the company had received offers of A$80 million to A$100 million - were incorrect.

 

Any sale will be subject to conditions including anti-competition clearance and approval under Australian law, as well as shareholders' approval, it added.

 

It noted: " Shareholders and other investors are advised to refrain from taking any action in respect of their securities in the company, which may be prejudicial to their interests, and to exercise caution when dealing in such securities."

The Companies Act governs the capital reduction procedures and provides for two methods of capital reduction: court sanctioned or non-court sanctioned capital reduction. A court sanctioned capital reduction requires (i) the passing of a special resolution for the reduction and (ii) a confirmation of the reduction by the court. The requirement of court confirmation provides protection to creditors of the company.

A non-court sanctioned capital reduction requires (i) shareholders&rsquo special resolution and (ii) a declaration of solvency by all the directors. A creditor may at any time within 6 weeks of the resolution apply to court to have the resolution cancelled. Hence, companies may prefer the court sanctioned capital reduction procedure on the assumption that such a reduction is less likely to be susceptible to legal challenge by creditors.

A capital reduction need not be expressly authorised by a company&rsquo s articles of association. It is sufficient if the company&rsquo s memorandum and articles of association do not exclude or restrict its power to reduce its share capital in this way.