Fast-rolling specialist dairy, cereals and nutritional products business, Freedom Foods, is growing so quickly it wants to raise an extra $200 million to fund future expansion.
Success in the dairy market and opportunities to grow further in the nutritional products are particularly strong in the wake of the company opening a new Sydney plant last year.
The pending supermarket launch of dairy products under the Australia’s Own label is expected to help drive a 40 per cent jump in Freedom’s total sales to almost $380 million this financial year, putting extra pressure on its Ingleburn (Sydney) and Shepparton (northern Victoria) dairy products factories.
The extra capital being raised on the share market will go towards a $120 million factory expansion agenda, and to pay down debt with a $75 million injection into the company’s balance sheet.
The balance sheet booster will also provide room for potential acquisitions and alliances.
Freedom estimates milk output at both dairy plants could jump from last year’s 85 million litres to about 350 million by 2019-20 if it has the capital to fund an accelerated production program and follow through with product development plans.
Alternatively, on current growth demand trends, Freedom will require closer to 200 million litres in two years’ time.
The health-oriented food and dairy producer will offer eligible shareholders three fully paid shares at $4.80 each for every 29 shares they already own.
It is also launching an institutional share placement at $4.80/share.
The offer price represents a 6 per cent discount on the company's average share price for the past 30 days.
The equity raising has been supported by the company’s cornerstone investors and large-scale dairyfarmers, the Perich family at Leppington Pastoral Company south-west of Sydney.
Perich family members and their company Arrovest Limited own about 53 per cent of the Freedom business.
Arrovest is will to take up its full allocation under the share offer and is sub-underwriting the retail entitlement deal, but will not participate in the institutional placement.
Funds raised from the equity raising will predominantly used to accelerate capacity, including increased ultra high temperature UHT-treated production options at Shepparton and new packaging and product formats such as plastic bottle milk and plant-based beverages and yoghurt at Ingleburn.
Investment in an enhanced range of high value-added nutritional products is also on the agenda.
Freedom wants to significantly beef up its protein fractionation and drying capability and blending and packing capabilities for its sports, adult and infant nutrition products produced through its Power Foods business bought in 2016-17.
In May it releases a new Vitalife adult nutrition category for the over-40 age group, supporting its Australia’s Own Diamond brand infant nutrition and Vital Strength sports nutrition range.
“Freedom Foods is strategically well positioned to build scale in its key business platforms of plant-based beverage, premium dairy and specialty cereal and snacks, with strong sales and earnings growth over the long term from Australia and key international markets in China, South East Asia and North America,” managing director Rory Macleod said.
“Increasingly, our key brands `Australia’s Own’ and `Freedom Foods’ will be at the forefront of driving our returns from our innovation and manufacturing capabilities in Australia and international markets.”
He said while the Australian food and beverage industry had significantly underinvested in the past 20 years, Freedom was developing a unique supply and manufacturing footprint in its key categories.
“We believe the ability to control supply and manufacturing inputs and deliver innovation more quickly across a range of product formats for our brands and our key customers will be a key strategic advantage in the medium to long term, particularly in adding value to Australia’s unique agricultural grain and dairy supply base,” he said.
The retail share offer opens on March 22 and runs until April 5.