Pure Foods Tasmania Secures Loan Extensions and Advances Turnaround Plan Amid Financial Uncertainty
Pure Foods Tasmania has executed key loan extensions with Commonwealth Bank and outlined a comprehensive turnaround strategy to address its financial challenges, despite ongoing material uncertainty over its going concern status.
- Executed $1.5m Market Rate Loan and $1.6m Better Business Loan extensions with CBA
- Restructured equipment finance loans to ease repayment pressures through 2026
- Implemented cost-cutting measures including $1.5m annual salary savings and product line rationalisation
- Raised $400,000 in additional capital and negotiating asset sales for debt reduction
- Auditor reissued unmodified opinion despite material uncertainty on going concern
Background and Auditor's Reissued Opinion
Pure Foods Tasmania Limited (ASX: PFT) has responded comprehensively to ASX queries following the reissuance of its full-year financial report for the year ended 30 June 2024. The company’s auditor withdrew a previous qualified opinion and issued an unmodified auditor’s report after reviewing additional evidence, including updated cash flow forecasts and loan extension agreements. However, the auditor maintained a material uncertainty paragraph regarding the company’s ability to continue as a going concern, reflecting ongoing financial challenges.
Loan Extensions and Financial Restructuring
PFT confirmed it executed formal loan extension agreements with the Commonwealth Bank of Australia (CBA) in December 2024 and January 2025. These include a $1.5 million Market Rate Loan and a $1.6 million Better Business Loan, both extended to 30 June 2026, with variable and fixed interest rates respectively. Additionally, equipment finance loans totaling approximately $697,000 were restructured to spread repayments over eight quarterly installments, easing short-term liquidity pressures.
The company also addressed a short-term secured loan from Amal Security Services, reducing the outstanding balance to $50,000, which is scheduled for repayment in weekly installments by mid-March 2025.
Operational Turnaround Initiatives
To stabilise its financial position, PFT has embarked on a multi-faceted turnaround plan initiated in September 2024. Key measures include a significant reduction in salaries yielding approximately $1.5 million in annual savings, cessation of unprofitable product lines, and a shift from an internally managed sales model to a broker-based approach aimed at lowering costs. The company has also increased prices on main product lines and is reviewing freight logistics to pass on pricing where feasible.
Further, PFT is actively considering asset and business line sales to reduce debt and bolster working capital. Procurement practices are under scrutiny, with negotiations underway to fix maximum prices for fish products temporarily, providing better cost control. A recent settlement with an equipment supplier has resulted in a favourable outcome of approximately $228,000.
Financial Outlook and Board Confidence
Despite a net loss of $3.9 million and a net cash outflow of $2.2 million in FY24, the board remains confident in the company’s ability to continue as a going concern. Updated cash flow forecasts project a positive cash balance by December 2025, supported by the implemented cost savings and operational improvements. The board also highlighted strong broker support and anticipated backing from key shareholders for future capital raisings if required.
The directors have affirmed that PFT’s financial condition is adequate to warrant continued quotation on the ASX and that reasonable grounds exist to believe the company will meet its debt obligations as they fall due.
Regulatory Compliance and Market Disclosure
PFT confirmed compliance with ASX Listing Rules, including continuous disclosure obligations. The company’s responses to ASX queries have been authorised by the board, reinforcing transparency and regulatory adherence during this period of financial restructuring.
Bottom Line?
Pure Foods Tasmania’s strategic refinancing and cost-cutting efforts mark a pivotal step, but the path to sustainable profitability remains closely watched.
Questions in the middle?
- Will PFT’s turnaround initiatives translate into improved profitability in FY25?
- How will the company manage refinancing risks beyond June 2026 loan maturities?
- What impact will asset sales and capital raisings have on shareholder value?
