Harvey Norman warns of ‘embarrassing’ $29m dairy farm loss – eDairyNews
Countries Australia |10 julio, 2018

Dairy Farmers | Harvey Norman warns of ‘embarrassing’ $29m dairy farm loss

Big box retailer Harvey Norman has told shareholders to expect up to $29 million in further losses from its soured experiement in dairy farming, with its collapsed Coomboona now up for sale.

But the company’s executive chairman Gerry Harvey likened the potential loss to “a pimple on a bum”, and has not rulled out making further investments outside its core retailing business.

Harvey Norman took a 49.9 per cent stake worth $34 million in the Coomboona dairy farm, in northern Victoria’s Goulburn Valley, in September 2015 only to see it run up losses of about $27 million by the end of December 2017, with half of that falling on the retailer’s balance sheet.

It wrote down its investment in the farm to zero in February, contributing to a fall in half-year profit, and in March administrators from Ferrier Hodgson were called in.

Coomboona owed Harvey Norman $37.9 million, and in May the retailer also bought a $36 million debt the farm owed NAB, making itself the collapsed farm’s first-ranking secured creditor.

With Coomboona hitting the market this week, Harvey Norman told investors on Tuesday it had received advice that proceeds from selling the farm’s land, buildings and livestock would fall between $13.6 million and and $29.13 million short of the almost $74 million it was owed.

At worst case, the loss would represent about 6.4 per cent of the company’s last full-year profit. But its co-founder and boss said it was “more an embarrassment than a problem”.

“It’s a nuisance, but it doesn’t make a difference in the big picture to what we’re worth and what we’re making,” he told Fairfax Media. “And it’s over then – it doesn’t repeat itself.”

But shareholders, already stinging from the $36 million write-down and operating losses from Coomboona, would be disappointed by the news of further losses according to Allan Goldin, a director at the Australian Shareholders Association.

“When this investment was first made I said ‘what in the world are they doing?’ – this isn’t their business,” he said.

“When you have no one independent on the board, shareholders just have to sit there and hope that Gerry does things right, because otherwise they could lose their money, make money – it depends what his whim is at the time.”

Mr Harvey on Tuesday ruled out putting company money in agriculture again, but said it needed to keep an “open mind” about investing outside its core retailing business in the future.

“You can’t just say ‘I open retail shops… and I sell fridges and that’s all I’m going to do’. You can’t tie yourself to that,” Mr Harvey said.

The loss from selling Coomboona would be recognised in its 2018 full-year accounts, Mr Harvey said.

He said it was better for Harvey Norman to buy NAB’s debt, so it would have first claim on the proceeds of any asset sales.

Harvey Norman’s shares fell 12 per cent from when it revealed its soft half-year results in February, from $4.58 to $4, and has continued to slide in the months since. On Tuesday to stock rose 2.3 per cent to $3.47.

The company’s first-half profit fell by 20 per cent to $293 million, and it cuts its interim dividend by 2¢ to 12¢.

Elders has been appointed to sell Coomboona, and says the 1816-hectare farm is one of “Australia’s most advanced dairy aggregations”, with 2500 Holstein cows currently producing more than 30 million litres of milk annual.

By: Patrick Hatch

Source: The Sydney Morning Herald

Link: https://www.smh.com.au/business/companies/harvey-norman-warns-of-embarrassing-29m-dairy-farm-loss-20180710-p4zqng.html

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