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The growing impact of Avian Influenza (AI) on Melbourne-based Farm Pride Foods’ (ASX: FRM) Victorian sites has prompted the company to cut costs and fast-track a $6.17 million capital raising ahead of receiving compensation for the loss of livestock.
Farm Pride says additional testing on its Rocks site, located in the Lethbridge area, has revealed the site is positive for AI, affecting some 240,000 birds or about 24 per cent of the company’s total egg production capacity.
The testing follows initial confirmation that AI had hit Farm Pride’s operations in nearby Meredith last week, taking the total impact to 36 per cent of egg production capacity.
Farm Pride says it continues to work “collaboratively” with the Victorian Department of Agriculture to monitor the situation in Meredith and Lethbridge.
However, ahead of seeking compensation from the Emergency Animal Disease Compensation Scheme arising from the disposal of affected birds, the company plans to implement several initiatives to see it through the crisis.
While the company notes that all operations outside of the Lethbridge area continue to operate as normal, it is undertaking an operational review of activities to reduce costs amid an expected sharp fall in egg production over coming months.
Farm Pride is also planning a non-renounceable fully underwritten pro-rata rights issue to raise $6.17 million before costs.
The issue will allow shareholders to subscribe for three new fully paid ordinary shares for every seven shares held at a price of 10c per share.
Farm Pride managing director Darren Lurie notes that the rights issue has been in planning for some time.
“Funds raised under the rights issue will be applied to supporting the company’s working capital during the recovery from the impact of AI on the Lethbridge farms, expanding the company’s rearing and laying farming operations, capital expenditure at the Keysborough grading floor and product plant and other working capital requirements,” he says.
“We are working through this current issue to continue the significant operating and financial performance turnaround which commenced with the company restructure in February 2023.
“During this period of reduced egg production we will be managing operations to limit the impact on our customers and consumers.”
The AI outbreak at Farm Pride’s operations, as well as other egg laying and rearing farms in the Lethbridge/Meredith and Terang areas, has led to a growing shortage of eggs on supermarket shelves and price increases.
Farm Pride Foods shares fell almost 12 per cent to 9.7c on the ASX today.
The Australian Department of Agriculture, Fisheries and Forestry reports this H7 virus is not a risk to the public as it rarely affects humans unless there is direct and close contact with sick birds. There are no food safety issues identified either.
"This is not the High Pathogenicity Avian Influenza H5N1 strain that has gained worldwide attention – nor is it closely related to that strain," the department states.
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