Red Lea Chickens Ltd was placed into voluntary administration last month after 60 years in business. Ridley sourced poultry by-products from that processor for its rendering plant in Maroota, outside Sydney, which makes poultry and fishmeal as well as oils for both domestic and overseas sales, largely for the aquaculture and pet food markets.
Ridley said the full year impact of the closure of Red Lea is estimated at around AU$ 6 to 7m, taking into account the combination of the reduction and subsequent loss of Red Lea raw material supply plus all the related follow on supply chain, processing costs and overhead recovery ramifications for the Maroota site.
Alan Boyd, chief financial officer and company secretary at Ridley Corporation, told FeedNavigator this morning:
“Ridley has been progressively adjusting to lower supply of raw material from this supplier since the volumes dramatically declined in the second quarter of this financial year.
“This sharp decline was announced to the market at the November AGM and as part of the reported results for the half year ended December 31, 2017. The cessation of all supply from this supplier now warrants a further realignment of operations at the Maroota site to the level of ongoing raw material supply.”
Ridley said it was cutting back on processing shifts at the NSW facility until it could find replacement raw materials in suitable volumes.
The feed manufacturer is exploring the possibility of developing a supply chain and process for the manufacture of a high protein and digestible poultry meal from spent hens at the Maroota plant. Additionally, the facility is considering a switch to a mackerel raw material stream from off the NSW coast for its fishmeal and oil production at that rendering facility.
The company is also looking to stabilize raw material to avoid degradation prior to processing, thereby, it said, improving the quality and performance of the rendered product and increasing the reach of the raw material supply chain.
“Each of these initiatives has the prospect of future earnings but is unlikely to contribute to the fourth quarter result of the current financial year.”
Aqua feed inventory
Plans for Ridley's AU$ 50m Tasmanian fish feed mill were recently approved, allowing an aqua feed restructure after the discontinuation last year of its supply to Huon aquaculture, one of Tasmania's largest salmon producers.
Yesterday (April 16), the company said it was continuing to work through a range of alternative strategies to address the aqua feed inventory legacy issues such as ageing unsold finished goods and unused raw materials associated with the prior cessation of supply to Huon, as reported in its half year results presentations.
“While the final commercial outcome for this inventory is currently still under assessment and will be brought to account in the determination of the full year result, the second half year incremental costs are estimated to be approximately $3m in addition to the $2.6m incremental cost reported for the half year ended 31 December 2017.”