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September 21, 2007

AUS: KH Foods admits “unacceptable” FY showing

Troubled Australian baked goods group KH Foods has posted a net loss of A$30.5m (US$26.3m) for the year to July, on sales of A$61.5m.

Troubled Australian baked goods group KH Foods has posted a net loss of A$30.5m (US$26.3m) for the year to July, on sales of A$61.5m.
 
The net loss was 5.4% down on last year and revenues from continuing operations rose by 5.7% to A$61.49m. The company also registered a trading loss of A$26.2m, which the directors said they regarded as “totally unacceptable”.
 
However, in its financial statement, KH Foods insisted that “much has been achieved” during the year in reshaping and restructuring the business.

The company said it had sold unprofitable businesses, removed significant labour costs and overheads, and refocused its sales and marketing activities, which it said would lead to a narrowing of losses in the coming year.
 
“As is evident, the group has been through a difficult year, and past few years, and there are still many challenges that lie ahead,” the company said. “However, as a result of the initiatives taken above, the current business plan indicates that a significantly reduced EBITDA loss will be incurred in the 2008 financial year.”
 
KH Foods has been striving to reduce debts incurred through unprofitable contracts undertaken in 2005. KH Foods earlier said that improvements in operational efficiencies had not been sufficient to stem losses, so price increases from grocery customers were sought in early 2007, leading to a loss of contracts.
 
Last month, the company sold its grocery cake operations to George Weston Foods Limited (GWF), part of UK-based Associated British Foods (ABF). In August, it also completed the divestment of the Beaumonts route business in the Geelong region, to local competitor Routleys Bakery for $0.4m. 
 
KH Foods also undertook a rights issue in January, underwritten by Pitt Capital Partners Limited and sub-underwritten by Washington H Soul Pattinson (WHSP), raising $44.3m of capital funds. As with funds raised through disposals, these proceeds were used to retire debt. The rights issue increased WHSP’s share in the company to 86.6%.
 
In April, KH Foods CEO Ray Mooney left the company “to pursue other interests”, with chief financial officer Ken Parsons becoming acting chief executive.

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