Milklab manufacturer Noumi says if it doesn’t achieve its performance targets or fails to defend the current class action, it may not be able to pay its debts.
Noumi also produces other branded milk and plant-based beverages and nutritional products. It employs 547 people and has three sites in Australia, one in Singapore, and one in China.
It is also the rebranded Freedom Foods Group, wearing that heritage like an albatross around its neck.
“The material uncertainty related to events or conditions arising from certain legal proceedings that may cast significant doubt on the group’s ability to continue as a going concern,” it said.
The day before Noumi warned investors and released its H1FY23 results, the Australian Securities and Investment Commission (ASIC) announced it had started civil penalty proceedings against the business, former CEO Rory Macleod, and former CFO Campbell Nicholas in the Federal Court.
In H1FY23, Noumi made a loss after tax of $23.57 million, compared to the H1FY22 loss of $65.491 million. Net cash inflow was “impacted by significant litigation and restructuring costs” were $949,000, including payments of $6.846 million as part of its settlement from US litigation with Blue Diamond Growers.
At the end of 2022, Noumi’s unrestricted cash position was $24.1 million, with an undrawn revolving credit facility of $8 million.
Since then, it has reached an agreement with its bankers to increase the revolving credit facility by $10 million. The company said that had that agreement been in place on 31 December, its combined unrestricted cash at bank and undrawn facilities would have been $42.1 million, leaving the company with enough liquidity for day-to-day business.
Meanwhile, consolidation of the company’s three operational sites in New South Wales into one at its Ingleburn site in Western Sydney should be completed by 2HFY23, and it has sold its shareholding in Australian Fresh Milk Holdings to help fund the US settlement.
Its net revenue in the first half increased 5.5 per cent to $279.8 million, mainly due to the recovery of farmgate milk price rises domestically and the continued sales growth of its plant-based beverage brands.
Noumi said it expects operational performance to continue improving off the back of investments in key brands and employees, cost management, and the gathering momentum of its operational turnaround program.
CEO Michael Perich said: “Noumi’s Reset, Transform, and Grow transformation program remains on track, with the Plant-based Beverages business now comfortably in the Grow phase and the operational and commercial improvement program in Dairy and Nutritionals already delivering a more efficient, more productive, and more resilient business.”
Noumi expects to make further operational and margin improvements in the second half, stemming from increased prices on plant-based beverages and the full year effect of domestic dairy price increases coming through, while it predicts freight and restructuring costs to moderate.
That said, the company then clarified that if those financial improvements are not achieved, or external factors significantly disrupt the business, there is a risk the group won’t be able to meet its liabilities when they fall due in the next 12 months.
It said if it was unsuccessful in its defence of the class action, and became liable for material compensation amounts, “There is material risk that the company and group will have insufficient funds to be able to pay these compensation amounts”.
“Due to the uncertainty surrounding the above matters, a material uncertainty exists which may cast significant doubt on the group’s ability to continue as a going concern and therefore whether it may be able to realise its assets and discharge its liabilities in the normal course of business,” it said.
