Mayor calls on councillors to make a good, sound, unemotional decision

Warrnambool councillors will vote next Monday night on the future of the yards, with upgrades of $5.66 million and just over $4 million in ongoing maintenance spending on the table.

Those $5.66 million works only include upgrades to roofing, but not soft flooring, best practice yards, any additional consideration for animal welfare or addressing concerns about the proposed 20-year life span of the current facility.

Warrnambool mayor Debbie Arnott said the council commissioned the report by Neil Castles as he was Australia's pre-eminent saleyards financial expert.

"His forte is saleyards. That's what he does," she said.

"This is not the only document, but it's a very important document.

"I try to base my decisions on data, that's something we were taught in business 25 years ago.

"We (councillors) need to make good, sound, unemotional decisions."

Cr Arnott said the report on the commercial analysis of the proposed capital works would be available online Thursday night as part of the Warrnambool City Council meeting agenda.

She encouraged anyone interested to read the report.

The Standard has been able to obtain a copy of the report.

Key takeaways are terms used by Mr Castles, including - 'impossible to achieve, unsound, council should not commit, not recommended and that the investment does not make financial sense'.

"Council may ultimately decide to undertake the new and maintenance capital works however the decision to do so should not be on the basis that it makes sense financially," Mr Castles said.

He said the council should not commit to the new capital works and the ongoing maintenance of $4.04 million as the throughput required to break-even was "impossible" to achieve.

"In summary, council should not undertake the capital works if it has no confidence that throughput will increase from 2021-22 levels," he said.

Using standard accounting practices Mr Castles estimated future losses at $1.182 million a year, totalling $23.6 million over 20 years.

According to the report the Southwest Victoria Livestock Exchange has a history of selling both cattle and sheep through its yards, reaching its peak of activity between the mid-1990s and mid-2000s.

In 2021-22, just 61,582 cattle were sold through the saleyards.

Mr Castles' base case financial model holds that throughput over the next 20 years.

However, Mr Castles said first quarter results for the current financial year indicated it was unlikely that 50,000 head would go through the saleyards in 2022-23 and throughput may be as low as 40,000 head.

"Based on first quarter 2022-23 results, a rebound above 2021-22 numbers may be difficult to achieve even with the completion of capital works," he said.

The expert said for council to get a financial result throughput would have to increase to 205,415 head and remain at that level - more than three times the activity for the past financial year.

He said even under the best scenario an increase to 122,523 head was required and that was "unlikely" given the most recent record was in 2006-07 when about 129,000 cattle, including calves, were sold through the yards.

It was noted the saleyards faced increasing pressure due to online auctions, direct selling to abattoirs and feedlots and private investors, who had built modern saleyards facilities.

"In summary, council should not undertake the capital works if it has no confidence that throughput will increase from 2021-22 levels," he said.

Mr Castles said even if only the $4 million maintenance works was done, the throughput required for a commercial result would have to double.

"There is a very significant risk that the throughput required to break-even would not be achieved. It is also likely that if maintenance capital works are undertaken, continued pressure would be placed on council to roof the saleyards," he said.

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