Australian cereal and dairy business Freedom Foods has enlisted the help of PwC and Ashurst in investigating potential fraudulent activity after announcing a $60 million write-down from expired milk on Friday, just a day after the sudden departure of chief executive Rory Macleod.
In late May the ASX-listed company had indicated that it was likely to make a one-off non-cash write-down approximately $25 million, but on Friday a revised estimate added $35 million to that figure.
“We’ve undertaken further analysis since that date and now we are
suggesting that further write-downs will be required to reflect the provisioning for obsolete stock, out-of-date stock, and product withdrawals,” executive chairman Perry Gunner said on a conference call on Thursday.
The company is awaiting information as to whether any finished goods inventory held outside Australia should be subject to write-down. The value of inventory held outside Australia was $2.0 million on May 31.
“It’s a disappointing episode in the Company’s history, certainly not our finest hour, but we want to assure everyone that we will provide information on a timely basis and be as transparent as we possibly can, being fully aware of our continuous disclosure obligations,” Gunner said, adding that the Penrich family will continue to support the troubled business.
When asked whether there were any suspicions of fraud during the call on Thursday, Gunner said, “We are undertaking further investigations and if we become aware of any errors or issues like fraud, we obviously would advise the market immediately.”
While the chairman said the company is not currently in a position to comment on MacLeod’s sudden exit, a further announcement will be made this week.
The sudden departure of Macleod came just a day after the resignation of the company’s chief financial officer and company secretary, Campbell Nicholas.
Shares plummeted 15 per cent last Wednesday before the company entered into a trading halt.
Freedom Foods clarified that a total of 61 positions have been terminated with 41 staff being made redundant.