Wellard sells M/V Ocean Ute for $18.1m, plans capital return to shareholders

Leading livestock fleet owner Wellard (ASX: WLD) has elected to sell its oldest vessel the M/V Ocean Ute for $18.1 million in cash.

Wellard expects the sale to Marshall Islands-registered company Bassem Dabbah Shipping to be completed in September 2024.

The completion of the sale will result in an estimated $17.8m increase in cash on hand after fees and commissions, the majority of which the Wellard board intends to return to shareholders.

Above book value

Wellard executive chair John Klepec said the sale is subject to the parties performing the contract terms and procedures.

“We are pleased to have achieved a sale price above the current net book value of the vessel,” Mr Klepec said.

“The M/V Ocean Ute has been a good vessel for Wellard and helped us meet a price point in the market,” he added.

“However, it is about to reach a tipping point with respect to market value, maintenance costs, future cash generation and profitability, so the sale is a good outcome for Wellard and its shareholders.”

“The vessel achieved mixed utilisation in the second half of FY2024 when it was idle until late February and then fully booked for the remainder of the period.”

“The board therefore took the decision to crystallise its value now.”

Fully utilised

In announcing the Ocean Ute sale, Wellard said demand for its M/V Ocean Drover vessel had been strong with the ship fully utilised for the calendar year to date, shuttling between South America and Turkey.

“Importantly, we now have charters for the M/V Ocean Drover committed right through until the end of the year, ensuring its utilisation rates will remain high,” Mr Klepec said.

He added that the company is continuing to engage productively with KPMG (Singapore) as the liquidators of Ruchira Ships – the registered owner of the M/V Ocean Drover – to seek a commercial resolution that will result in the return of full and unencumbered legal title over the Ocean Drover to Wellard.

“We expect to be able to update shareholders about the progress of these negotiations when the company releases its full-year financials in late August,” Mr Klepec said.

Fleet redeployment

Wellard reported earlier this year that falling prices for export feeder cattle to Indonesia – from approximately $4.70 per kilogram at the start of CY2023 to less than $3/kg in the last quarter – did little to stimulate greater demand for Australian cattle from Indonesian importers and therefore demand for Wellard’s vessels.

Charter demand from Chinese importers for dairy cattle was similarly non-existent in mid-CY2023, prompting Wellard to relocate both the M/V Ocean Drover and M/V Ocean Swagman to the South America-to-Middle East route.

Despite this, Wellard posted a net profit after tax improvement of 111% on the company’s net loss after tax in H1 FY2023.