Originally Posted by
Toddy
Seeka and Eastpack are in different cycles with their modernization. You can't compare the funding models 100 percent because Eastpack is totally grower owned. So Eastpack is forced look at other funding alternatives.
Seeka got caught out because they purchased assets at the top of the investment cycle when money was cheap. The assets they purchased were not what they thought they were. This lead to a record fruit loss for their growers the previous season. Then we went into a low fruit volume season.
The hangovers are significant. Losses on the leased orchards will take time to fillter through from a cashflow perspective as a large chunk of the losses are sitting on their books with the growers.
To hold onto their grower base Seeka offered discounted medium term fixed price packing contracts. That's right, fixed.
Seeka is cutting staff, restructuring internally, and cutting costs.
With fruit volume increases next season the cashflows should be impressive. But the unknown question is to what extent the Seeka overheads are excessive.
The question. What would I do. I would divest all not performing assets and increase the capital expenditure significantly into IT and robotics. Not cut capital expenditure as Seeka has done.
Disc. I hold Eastpack and Seeka shares.