Industry:Distribution & Logistics
Company:The Company is a wholesale seafood importer, primarily focused on pasteurized crab from Asia and Latin America, as well as other seafood.
The Company experienced significant growth over the course of its 20 year history, especially in recent years. In order to meet its working capital needs, the Company switched to an Asset Based Lender. The rapid unplanned growth in Inventory resulted in the Company seeking an over-advance shortly after securing the loan.
- Review and analyze the Company’s business operations and financial statements in order to identify those problems, practices and issues which affect the Company’s profitability on a short-term and long term basis.
- Review Company’s business forecast and financial projections for the FY15 and FY16 for reasonableness and attainability.
- Validate the Company’s ability to meet debt service obligations.
Focus preformed all the tasks required to complete the engagement scope.
- FMG worked with the Company’s CFO to formulate a plan that would focus on increasing inventory turns, resulting in less dependence on the credit line to finance its inventory purchasing and carrying costs.
- Focus recommended that the Company reduce the number of items available for sale: reducing skus and increasing turns; in order to facilitate inventory turnover. As part of this process, the Company also implemented sales initiatives to increase the sale of fresh crab meat that does not require long term storage capacity.
- The Company also started to negotiate shipment of goods with suppliers in order to shift some of the inventory carry burden on the supplier; foregoing extended A/R terms for lower inventory and financing costs.
- Planned reduction in inventory not only improved the balance and working capital turns, but also reducing overall inventory carrying costs; improving profitability.
- The implementation of these initiatives allowed the Company to be in compliance with all financial covenants; without the need to seek any over-advance requests in the high volume peek harvesting season.