Dairy processor Warrnambool Cheese and Butter (WCB), several south-west milk suppliers and a transport company are among the unsecured creditors owed money by failed Victorian broker, National Dairy Products (NDP).
NDP administrators Deloitte Restructuring Services told unsecured creditors they could expect as little as five cents in the dollar, under a deed of company arrangement.
In a letter to unsecured creditors, administrators Salvatore Algeri and Glen Kanvesky said if NDP was declared insolvent, they could expect nothing, or just over a cent in the dollar.
The administrators said the primary cause of the company’s net loss was the milk prices inflated above those offered by other milk buyers that NDP paid to suppliers in financial year 2015.
NDP had agreed to continue paying the higher prices to maintain supply agreements.
The administrators found the company had liabilities of $9.2 million that included $4.3m to unsecured creditors and $4.7m owed to former managing director, Tony Esposito, as an unsecured loan.
Among those owed substantial amounts of money were WCB, $479,756, Peter Stoitse Transport, $1.35m and Tatura Milk, $197,000.
The letter to creditors also said dairy farmers were also owed sums of up to $1.1m in projected claims.
The administrators found the company had never operated profitably, incurring year-on-year losses from 2015.
“This appeared to be primarily due to an inability to negotiate profitable pricing with suppliers and customers, which as a result negatively impacted the company’s margins,” Mr Algeri and Mr Kanvesky said.
“The company was also impacted by a high overhead structure and generally poor management.”
Management had advised the administrators the company’s start up strategy was to establish and secure a supplier base by offering better prices than its competitors.
The administrators said Violetta Esposito was the sole NDP director but Mr Esposito might have been acting as a shadow director. They said all daily decisions about the operation and general running of the business appeared to be made by Mr Esposito.
The administrators said they had been unable to meet with Ms Esposito but written reasons she gave for the company’s collapse were the loss of about six farm suppliers over a two-day period, representing more than 80 per cent of the company’s milk supply, and the continuing discounting of milk by Murray Goulburn, which was a customer of the company.