14/05/2004

GOLDEN CIRCLE SEEKS EQUITY PARTNER

Golden Circle Limited will seek the approval of its grower shareholders to allow a minority equity partner in the company that was founded 57 years ago by Queensland pineapple farmers.

 

The company’s interim chief executive Robin Ferris told a meeting of Golden Circle shareholders today that the company needed a cash injection of about $50 million to reposition itself as a best practice fast moving consumer goods (FMCG) company.

 

At the same time the equity raising would strengthen its balance sheet, provide capital expenditure to improve performance, and grow its brand presence in Australia and overseas.

 

Mr Ferris advised shareholders that the equity injection and subsequent performance improvement in the company would position Golden Circle for a stock exchange listing in three to five years. However, he flagged the possibility that a major industry or investment consortium may seek full control of the company ahead of this process.

 

Mr Ferris said the company had received numerous approaches from interested equity partners in recent months and he expected intense competition.

 

The stock exchange listing would provide shareholders with marketability of their shares and access to increased shareholder value.

 

Mr Ferris said the equity raising would require a change to the Company’s constitution, and could only proceed with the approval of 75% of shareholders. It was expected a concrete proposal would be put to shareholders within the next six months.

 

In February this year, Golden Circle announced a net after-tax loss of $31.1 million for 2003 – the first in the company’s history. The loss was the result of several major factors including SARS; severe drought; write down of inventory, surplus assets and goodwill on recent acquisitions; and redundancy and restructuring costs.

 

As a result, shareholders received no dividend for 2003.

 

Mr Ferris said the company’s board recognised that Golden Circle’s shareholders were both financially and emotionally involved in its ownership.

 

“Golden Circle was founded by pineapple growers and many of our current shareholders are descendents of those original growers,” Mr Ferris said. “Ownership of Golden Circle is an issue that must be treated seriously and with great respect. But without a cash injection, the company will not reach its full potential.”

 

Mr Ferris, who was appointed in December 2003 to lead Golden Circle’s recovery, told shareholders that the company had traded profitably in the first three months of 2004. However, the April to July period was traditionally and seasonally the low point of the year, and depressed retail sales in April combined with an acute shortage of oranges would impact on the bottom line in the second quarter.

 

Considerable progress had been made in improving the company’s overall performance, with substantial savings achieved through reductions in inventory, elimination of loss-making activities, external contracting of services, and supply chain improvements.

 

Mr Ferris said a critical plank of the supply chain review included a new quality-based payment plan for pineapple suppliers, which he also detailed at the meeting.

 

He said the plan would be implemented progressively over the next three years, beginning July 1. It was designed to ensure that growers who supplied the company with the type and volume of pineapple at critical times during the year to meet customers’ needs were appropriately rewarded.

 

Under the new scheme, growers would be paid a premium for pineapple that met strict quality and delivery criteria.

 

“In the past, what we’ve made and when has been determined by what our farmers grow and when they deliver the raw materials to the factory,” Mr Ferris said. “But to be efficient, what Golden Circle makes, and when, must be driven by consumer demand.”

 

Mr Ferris said Golden Circle would require 60,000 tonnes of Australian-grown pineapple a year, with improved on-farm management to meet product and delivery specifications. It would also be seeking greater diversity in growing regions and greater reliability of supply.

 

This would provide sustainable profitability for both pineapple growers and Golden Circle.

 

“We realise some growers won’t be able to meet our requirements and may have to exit the industry,” Mr Ferris said. “But if Golden Circle is to compete in domestic and international markets, some rationalisation of the industry is unfortunately inevitable.”

 

ENDS

  

For further information, contact:

 

Lynda Schekoske, Public Relations Manager, Golden Circle

Tel: 07 3266 0113, Fax: 07 3260 5994, Mob: 0417 725 989