There is little joy in the Happy Valley (ASX: HVM) offices today, as the infant formula company enters voluntary administration. “It is disappointing to announce the appointment of administrators today,” the Chairman of the Company, Kevin Bush, stated grimly in an announcement.
Due to dwindling global infant milk supply, HVM was able to thrive during the extremely challenging COVID period, even as New Zealand was in lockdown for nearly three years. However, with demand for dairy products suspended in limbo, Happy Valley has few recourses, the most optimal of which is entering voluntary administration.
The board of the Company has appointed McGrathNicol to be the Company’s administrators. They will “exercise all or any of the powers conferred upon them as administrators by the Companies Act 1993 (Administrators), effective immediately to HVM and its subsidiary Five Redland Road Limited”, as per its report.
With the new guns walking in, the Company has witnessed a slew of resignations. Grant Horan has resigned as a director effective immediately, following a brief stint. Horan took the helm in May this year, replacing Randolph van der Burgh who resigned on May 22, 2023. The Company’s CFO Richard Chew also resigned on June 26.
Bush added, “Our ability to identify and pursue a dairy protein strategy in the last eight months saw a significant amount of interest and we were able to secure offtake agreements as previously announced. As a result of this, HVM had several investors undertake due diligence and negotiations since April until Friday last week; however, unfortunately, the current market conditions of increasing high interest rates, tightening milk supply and the continued emergence of China domestic milk supply has left HVM unable to secure the necessary funding to continue at this point.”
Happy Valley’s boom, like that of many others, had come as China’s dwindling milk supply compelled the country to import infant milk formula. Companies like Bubs (ASX: BUB) were exporting their infant milk formula worldwide, including the US. However, with countries now prioritising self-sufficiency and milk prices set to soften, the outlook for Happy Valley and other infant milk formula companies remains uncertain.
With just about $228k in the bank as of the March quarter and nada in unused financing facilities, Happy Valley has been recording a trajectory of losses. In H1 FY23, these losses shot up by 16% to about $2.8 million. Compared to December 2021’s $3.7 million, Happy Valley ended December 2022 with only $889k in cash equivalents. Now, its fate rests in the hands of the voluntary administrators.
As per the New Zealand Companies Act 1993, a first statutory meeting of creditors must be held within eight business days after the administration begins and is expected to take place on 18 July 2023.
Alinda is a Business Reporter for The Sentiment
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