The fall out from the failure of Scotts Refrigerated is continuing to provide aftershocks around the Australian road transport industry with the company being placed in receivership by its owner, private equity firm, Anchorage Capital Partners.
Scotts is a major provider to the largest supermarkets in Australia and its troubles has put the jobs of its 1500 employees at serious risk and may have knock on affects on an already stretched national logistics and food supply chain.
Scott’s Refrigerated Logistics is one of thee country’s biggest trucking companies, and delivers to all major supermarkets, including Woolworths, Coles, IGA and Aldi, as well as Foodbank Australia.
Although Scotts trucks will apparently continue to deliver to customers during the early stages of receivership, if Korda Mentha, the insolvency specialist which has been called into manage the receivership by Scott’s secured creditors, can’t sort the mess or hatch a deal supplies may be put at risk around the country.
Anchorage Capital Patterns hopes a a buyer can be found for the business, and its 1500 staff . As well as the full time employees, there are also a multitude of subcontractors, while the company operates 24 cold storage warehouses across the country. I
“We’re aware of the challenges being faced by one of our transport providers and we are working hard to provide support and minimise the impact this might have on customers and product suppliers,” said a spokesman for supermarket giant Coles.
It is believed that Scotts may be the tip of the iceberg when it comes to company insolvency, and it is expected this collapse may be the first of many this year as the multiple interest rate rises start to exert pressure on the economy. Disruptions from pandemic-fuelled labour shortages as well as major weather events have affected the supply chain and have driven stock shortages and inflation through grocery price rises
Anchorage Capital Partners bought Scotts Refrigerated from automotive dealership group, AP Eagers in 2020, taking over its fleet of 500 trucks and 450 rail containers. AP Eagers became owner of Scotts when it took over Automotive Holdings Group which originally purchased the operation.
Anchorage, which made headlines late last year by taking over department store, David Jones, appointed McGrathNicol as administrator on Monday afternoon. only to have the secured creditors appoint McGrathNicol later that day.
Scott Langdon from KordaMentha’s believes an “orderly sales process” would begin immediately.
“We anticipate a high level of interest in this business and its assets, given its significance in the cold chain supply system in Australia,” he said.
“We are seeking support from all customers to give the business the best chance of being sold to a new long-term owner.”
When Anchorage bought the company, ScottsRL chairman Phil Cave, whom the private equity firm appointed, said the acquisition “reflects confidence in the ScottsRL business and its future potential”.
“We are committed to supporting and investing in the business to improve and grow ScottsRL’s operations,” he said at the time. Mr Cave represents Anchorage on ScottsRL’s board with Simon Woodhouse.
Anchorage describes itself as a private equity firm that focuses on investing in companies with “strong and established track records but are operating below their full potential”.
The Transport Workers Union said the collapse of Scotts Refrigerated is a tragedy.
Michael Kaine, the national secretary of the TWU said transport companies like Scott’s were struggling under razor-thin margins.
“This is another tragedy of the untrammelled commercial power at the top of transport supply chains,” said Kaine.
Receivers appointed to Scott’s Refrigerated Logistics said the business would operate as usual for the foreseeable future.
KordaMentha partner Scott Langdon said workers would stay in their jobs through the sale process.
“We facilitated the payment of suppliers yesterday [Monday],” he said.
The NTU has used the company’s closure to attack the what it says is a disparity in profit margins between transport operators and supermarkets.
Mr Kaine said supermarket giant Aldi’s profit margin was far higher than those of its competitors and that it had “reaped the rewards”.
“Retailers are reaping the gains from razor-thin margins while operators and drivers collapse under the strain,” he said.
“We urgently need reform in transport to ensure wealthy clients at the top of supply chains are accountable for fair, safe and sustainable transport operations for the freight of their goods.”
But an Aldi Australia spokesperson hit back at the union.
“Statements made by the TWU with regard to our business results and our supplier relationships are categorically untrue, baseless and damaging,” the spokesperson said.
“The supermarket supply chains rely on many interdependent partnerships.
“Despite the challenges presented with this news, we are working with our suppliers and logistics partners to minimise impact to Aldi customers.”