Vantage Performance acted as the Chief Restructuring Officer (CRO) for this project.
How we helped a failing sugar mill weather the storm.
A devastating cyclone and prolonged heavy rains hit the Proserpine sugar cane milling business in North Queensland right before harvest wiping out the crops in the region. The resulting loss of revenue couldn’t have come at a worse time for the one hundred-year old company which was already facing significant cost overruns on a large capital-intensive project.
The business was asset rich, but cash poor; and the board was under extreme pressure as the mill was the town’s biggest employer and its closure would have a devastating impact on the community.
The inclement weather and increasing consolidation within the sugar industry had severely affected the business’s revenue and cash flow, and its normal healthy annual turnover of $110 million was dangerously down on previous years.
The immediate problems the business faced were a $25 million working capital shortfall and a huge tax debt. So they called in Vantage Performance.
How we turned things around.
“Our immediate response was to provide the board with strategic options and introduce a robust 100-day cash flow management plan”, says Michael Fingland, Vantage Performance’s CEO and project leader.
“The next step was to restore the confidence of its financiers, members, suppliers/farmers, the local community and particularly the customers of its deposit scheme because if they withdrew their deposits the working capital requirement would have increased to $45 million.”
The process was complex. The Vantage Performance team stabilised the deposit scheme – which still had $20 million on deposit – to encourage the support of financiers and established a new 3-way forecast to support a $20 million debt raise.
Further investigations into the company’s finances and operations revealed a way to immediately save $5 million in costs and sell surplus assets which would raise a further $5 million.
Now to approach major creditors and the ATO.
“As part of our rescue plan,”, says Michael Fingland, “we spent a lot of time negotiating payment plans with the company’s major creditors and in extended talks with the ATO, we deferred a $1.2 million tax liability for 10 months giving the business room to breathe.”
A carefully-prepared submission to potential financiers successfully secured a $20 million increase in debt facilities, which, together with other working capital initiatives, met the working capital requirement allowing for repayment of all overdue creditors and the ATO.
Now it was time to decide the future of the business with a solution that would offer the best return to its shareholders. After careful consideration, and professional advice from Vantage Performance, the board decided to sell the business which was eventually sold to Wilmar International, one of the worlds largest sugar producers.