There was little upside for beer brewer Moa Group shares
in the near-term, Craigs Investment Partners broker Chris Timms
Moa issued a market profit downgrade on Monday, forecasting a
loss of between $5 million and $6 million for the end of the
current financial year.
The downgrade was more than double that stated in the
prospectus document at the time of the initial public
offering and worse than the $4.5 million in a research note
published on October 21.
Mr Timms said the miss was largely due to the poor
performance in the New Zealand market and the disruption
caused by the change of distribution model.
There was little new detail in the announcement, but he saw
high levels of uncertainty and risks around Moa and expected
little upside news in the coming 12 months.
''We see potential for further disappointments if beer volume
sales are unable to improve. The balance of risks continue to
be skewed to the down side.''
The key points from the Moa announcement included the 2014
financial year's volume forecast to be 136,000 nine-litre
equivalents, 30% below the prospectus forecast of 195,000.
New Zealand had been a major drag but the United States and
other international markets were expected to meet original
expectations. Australian volume had been slightly behind
prospectus forecasts but would be offset by the ''rest of the
The company noted lower volumes and a significant bias
towards its value-driven ''original'' product would create a
drag on margins for the current year.
''Moa has failed to make any meaningful presence in the local
market with its `estate' or `reserve' ranges under the new
strategy; driving meaningful volume away from its original
product may be difficult.
''Additionally, manufacturing costs for the estate and
reserve ranges will also be higher until volumes improve
meaningfully,'' Mr Timms said.
Given the number of uncertainties, including issues attaining
resource consent and modest volumes, a decision on the
brewery expansion had been delayed.
Mr Timms remained concerned a greater-than-expected loss for
the year and uncertainty around volume outlook might hinder
the expansion plans.
With about $10 million in cash at March 31, and an expected
$5 million to $6 million loss for 2014, the $6.1 million
earmarked for the brewery expansion was unlikely to be
With the brewery expansion unlikely to occur, the company's
cash balance at the end of the current financial year would
be around $4 million to $5 million.
On the upside, Moa was undertaking a strategic review which
would encompass all parts of the current business model,
including manufacturing options, pricing and the suite of
available products, he said.