Wellard sells largest purpose-built livestock ship to Kuwait-based entity
Wellard has sold its MV Ocean Shearer vessel to Kuwait listed entity AI Mawashi’s subsidiary.
Shipping company Wellard (ASX: WLD) has revealed the sale of its MV Ocean Shearer for US$53 million (A$77.8 million), which is part of the company’s recapitalisation program.
The MV Ocean Shearer is the world’s largest purpose-built livestock vessel, but Wellard claims it has been “consistently underutilised” in the current volatile environment.
Wellard executive chairman John Klepec said the ship was primarily used along the South America-Turkey trade route, which has been closed suddenly on two occasions. This resulted in Wellard being left with fixed financing and overhead costs without any revenue.
Its new owners Kuwait-publicly listed AI Mawashi’s subsidiary Livestock Transport & Trading Co KSC is one of the largest sheep exporters from Australia to the Middle East.
According to Wellard, the new owners will deploy the MV Ocean Shearer across the Australia-Middle East trade route, which will provide ongoing benefit to Western Australian farmers and other businesses within the supply chain.
Paying down debt and maximising profits
Once the sale has been completed, Wellard plans to use US$42.3 million (A$62 million) of the proceeds towards reducing the company’s financial debt to about US$16.7 million.
Wellard is currently paying about US$8 million annually in principal and interest costs on the MV Ocean Shearer in addition to maintenance and crewing costs.
“The sale of the MV Ocean Shearer cuts Wellard’s financial debt to very manageable levels while crystallising value from an under-utilised vessel in our fleet,” Mr Klepec said.
“Given our comparable sized vessel, the MV Ocean Drover has completed three times the number of voyages as the MV Ocean Shearer in 2019. It makes financial sense to release value and reduce debt from an under-utilised asset – adding A$15.8 million to our cash reserves and reducing our annual debt servicing by US$8 million,” Mr Klepec explained.
The remaining US$10.7 million (A$15.8 million) will be kept to underpin the company’s operations and working capital needs.
Moving forward, Wellard plans to focus on maximising its profits from the MV Ocean Drover, MV Ocean Ute and long-term chartered Ocean Swagman.
“Wellard can now focus on charter utilisation and running its vessels efficiently.”
“Our company has changed its approach and has become and international livestock logistics business, with more robust systems and processes, best-in-class animal welfare outcomes, a leaner overhead structure, and a more reliable revenue stream from its highly specialised charter operations,” Mr Klepec said.
News of the sale spurred Wellard’s share price up almost 20% to trade at $0.055 early afternoon.