Midway (ASX:MWY) 1H19 results & outlook


by Anna Napoli

Midway Limited (ASX:MWY) Managing Director and CEO Tony Price talks about the company's 1H19 results, performance of its acquisitions, strategy and outlook.

Anna Napoli:
Hello, I'm Anna Napoli for the Finance News Network and joining me now from Midway (ASX:MWY) is Managing Director, Tony Price. Tony, welcome to FNN.

Tony Price: Thanks, Anna.

Anna Napoli: First up, can you start with an introduction to the company?

Tony Price: Midway Limited (ASX:MWY) is an integrated forestry business. The only one, fully integrated forestry business listed on the stock exchange. And by integrated I mean that we operate from on the cradle to grave basis. And that means that we plant trees, we tend trees, we harvest them, we take them to processing facilities, we market them, and then we also in some cases deliver the product all the way to the customer.

We're one of the biggest exporters in Australia. And most of our product is delivered to customers in China and Japan.

Anna Napoli: Let's talk about your first half 2019 results. What were some of the highlights?

Tony Price: We basically generated a revenue of about $124 million. Which was up 45 per cent on the previous half year. That delivered an EBITDA of $12.2 million. Which was up 88 per cent. So all in all we had a good year. That was driven by a significant increase in sales price and also the tailwind of foreign exchange.

Anna Napoli: Now to your operations. Can you tell us more, starting with production?

Tony Price: We've got operations throughout Australasia. We have an operating business that manages plantations on our behalf and also on behalf of third parties. We also have a number of processing facilities, Queensland and two in Victoria. And more recently we've developed operations in Tasmania and also Western Australia.

Anna Napoli: And how about pricing?

Tony Price: Pricing has moved upwards significantly in the last two years. So 2018 calendar year, we were able to achieve 8 per cent price increase with our product. And in 2019, the first half of 2019, our prices are up 11 per cent. And that's driven by the supply/demand. So what we're seeing is a tightening of supply into the Australasian market. And as a result we're seeing significant upward pressure on price.

Anna Napoli: And how about any new acquisitions?

Tony Price: We've made a couple of acquisitions in 2018 and we're looking to bed those businesses and integrate them into our current operations. As well as that, there's a number of other opportunities we're looking at. Largely in the forestry sector and in the four key areas that we operate. But we're considering some other agricultural products which don't deviate too far away from our business, for example, grain.

Anna Napoli: And can you tell us about the market dynamics in Australia today for plantation companies?

Tony Price: Around the global financial crisis time, we saw most of the plantation companies, the MIS companies, failed and they all went into receivership. But post that period, we've seen recapitalisation of those plantations by private equity, largely. And that's been a good thing.

There was a period, though, when the pricing was low. And therefore people haven't been planting trees. But with the pricing signals now, we're seeing a significant amount of planting going on. And I think the outlook looks very positive. So I can see our plantation state expanding quite rapidly.

Anna Napoli: What exactly is Midway's (ASX:MWY) strategy and progress?

Tony Price: Okay, so we really got three major areas that we're focused on. The first one is to make sure that we're maximising the utilisation of our current processing assets. That's very, very important. And we're looking at ways of getting additional resources through those, as grain, for example, as I suggested earlier. The other major strategies looking at acquisitions that fit within our key skillsets, and the third plank to our strategy is making sure that all of our operations are running as efficiently as they possibly can. And that's running cost reduction programs and making sure that those businesses are doing what they need to do.

Anna Napoli: Last question now. Tony, is there anything else you'd like to add?

Tony Price: I guess as a forester, professional forester, I'm very, very passionate about the forestry industry. There have been times in the past when it's had a tough time and been criticized. But I see forestry as a major opportunity for us to help with the climate change issues, trees suck in carbon dioxide and pump out oxygen. They store carbon and could be a significant player in terms of helping with the climate change issues. And therefore, Midway's well positioned to take advantage of those opportunities.

Anna Napoli: Tony Price, thank you for the update.

Tony Price: Thank you very much.