Article in the age today.http://www.theage.com.au/business/outlook-not-so-sweet-for-honey-giant-20091216-kxmr.html
AUSTRALIA'S biggest commercial honey group, Capilano Honey, has warned it will lose about $2 million in the first half of the financial year, a slide back into the red that could jeopardise its attempts to meet a $10 million debt deadline in March.
Capilano, close to launching a rights issue, said yesterday that worsening exchange rates for exporters and shrinking honey supplies due to drought were to blame.
''International conditions for supply of raw honey remain unpredictable,'' Capilano said. ''These conditions have a material unfavourable impact on Capilano's profit expectations through decreased export revenues and expected 'mark to market' devaluation of assets held in other currencies and higher-than-expected domestic honey prices to secure supply.''
It said the dire environment would force it to retreat from some of its offshore markets, including a large proportion of the Canadian market.
Capilano had returned to the black last financial year, recording a small profit of $707,000, but would now record a first-half pre-tax loss of about $2 million. The withdrawal from export markets was also likely to affect the carrying value of the related goodwill.
However, there would be a reduced need for imported honey to supplement Capilano's supply, and capital resources and general expenses would be reduced to match lower production levels.
The profit warning comes at a delicate time for the Capilano board as it seeks to raise much-needed capital from current as well as new shareholders.
The need for a raising arose from a review of its lending facilities earlier this year amid the global financial crisis. Capilano was given new debt covenants that demanded the reduction of its debt by $10 million by March to please its bankers.
It expects to raise $4 million from internal resources but believes existing shareholders will not be able to cover the shortfall. Last month shareholders voted in favour of a restructure of the company's archaic constitution to facilitate a raising. The changes included the removal of shareholder caps.