Transparency "essential" from Mackay Sugar: former director
THE company that advised Bega Cheese to spend $460m buying back Vegemite has delivered a report to Mackay Sugar, believed to hold a solution to it clawing back a debt that's increased ten-fold since 2010.
Corporate advisory firm Kidder Williams handed Mackay Sugar chairman Andrew Cappello the report at 4.30pm Monday.
However, he is not expected to brief growers on the outcome before the end of February.
"We are currently reviewing the results of the 2016 season, we understand the need to report to shareholders and plan to hold meetings before the end of February," Mr Cappello said.
Former Mackay Sugar director Barry Sheedy believes it is "absolutely essential" the company calls a meeting with its shareholders immediately, to brief them on the 2016 season, its financial position and plans for the future.
Otherwise, he believes concerned growers will rise up and demand a meeting themselves.
Mr Sheedy also called the Kidder Williams report a "smokescreen" and predicted the only advice it would offer would be to sell.
In his opinion, the company should be looking to curb debt by selling non-sugar assets.
During the 2016-2017 season the sugar milling company, which operates the Racecourse, Farleigh and Marian mills in Mackay, copped widespread criticism for poor milling performance.
The season ended with 350,000-400,000 tonnes of cane left in the paddock.
Not only did the inability to crush the larger crop frustrate growers, it had Mr Sheedy - a Mackay Sugar director from 1996-2005 - predicting another loss for the 2016-17 season, on top of the $26.1m loss in 2015-16.
That would likely exacerbate the company's net debt, which its 2015-2016 annual report shows has blown out to $212.5m, more than 10 times as much as 2010 when net debt came in at $21.8m.
In Mr Sheedy's opinion, the company has few options but to sell off its non-sugar assets, including its co-generation plant, which the company stumped up $40m towards, and its interest in refineries.
"Mackay Sugar has a very, very serious debt problem," Mr Sheedy said.
"If they don't change it and it carries on the way it has, they will lose the mills."
Yet, in a statement published in the Daily Mercury on January 7, Mackay Sugar chairman Andrew Cappello said the co-generation plant, which uses bagasse from the mill to produce steam and create electricity, had only strengthened the company.
Mackay Sugar's 25% stake in sugar refineries, located at Racecourse Mill, Yarraville in Victoria and Auckland, also returned a consistent profit, about $11m.
In fact, without this $11m each year, the company could have returned an operating profit only three times in the past 16 years - in 2003, 2010 and 2013.
But Mr Sheedy pointed out the investment also required a significant contribution each year.
"Whilst they may get a $10m profit, they may be asked to contribute $6-$7m towards operating costs," he said.
Rather than corporate advisors, he called on the current board, the majority of which he views as inexperienced, to turn to former Mackay Sugar managers for guidance.
He believes a vast amount of experience at the mill was lost during the mining boom, and when Mackay Sugar operations were outsourced to Transfield Services in 2002.
"I am prepared to assist in facilitating an advisory group," he said.
"It hurts me to see what has happened to the assets of Mackay Sugar."
Mr Sheedy has also always been against changing the cane payment formula, to pay growers for molasses and fibre as well as sugar, and claims it was implemented before any assessment was made about how it would impact profitability. During the past decade, the altered formula is believed to have channelled $65m from the company to growers.
"Fundamentally, it was flawed, and that's proven to be the case over the years," he said. However, he said it only accounted for a small amount of the problems the company now faced.
Queensland Canegrowers chairman Paul Schembri said he'd received as many calls from growers in the past 4-6 weeks as he ever had in his 34 years in the industry.
"(They've been about) all the issues around milling performance and being concerned about the future of Mackay Sugar," he said.
"People are worried about it."
Mackay Canegrowers' annual general meeting will kick off at 9.30am today, at Wests Leagues Club in Walkerston.
Chairman Kevin Borg said topics would include the environment, the 2017 harvest, sugar marketing and transport issues. He said Mackay Sugar issues would not be the focus.