Beer company Broo is frantically trying to conserve cash as its share price languishes at a record low of 2, with an ambitious $100 million ''green'' brewery project in Ballarat on ice as the group scrambles to generate extra funds for its core business from potential asset sales.
Broo, which listed on the ASX in October 2016 and was trading at 39 in late November 2017, on Tuesday went into a trading halt on the ASX pending the announcement of a ''material supply agreement''.
Broo founder and major shareholder Kent Grogan pitches the company as the beer ''underdog'' against multinationals, and champions an Australiana theme with a silhouette of a kangaroo on the label to attract Chinese consumers.
But the Australian-owned push isn't helping in a market where Victoria Bitter and Carlton Draught owner CUB is about to be swallowed in a $16 billion buyout by Japan's Asahi, and XXXX Gold owner Lion is owned by Japan's Kirin Corporation.
Broo has a cash-flow squeeze on its hands and may need a capital raising.
The $100 million brewery plan at Ballarat, announced with much fanfare in early 2017 after the Victorian government sold the group 15ha of land in the Ballarat West Employment Zone, has stalled.
Broo has been investigating a potential sale of the land to bring in extra cash.
The City of Ballarat said on Tuesday there was ''no current planning application'' by Broo for the development of the brewery.
It had been trumpeted as the ''world's greenest brewery'' because of its environmental credentials and lower water usage compared with traditional breweries.
Broo didn't return calls on Tuesday.
An announcement to the ASX on Tuesday requesting a trading halt said it was in relation to the ''material supply announcement''.
The brewer's main products are Broo Premium Lager and Australian Draught Beer, sold in independent liquor stores in Australia under a distribution deal with Metcash's liquor arm.
The company also has a deal with a Chinese distribution group Beijing Jihua Information Consultants Ltd for a seven-year ''take or pay'' agreement to sell 1.5 billion litres of Broo Premium Lager into China for aggregate revenue of $120 million.
Broo also operates two regional brewhouses in Victoria, the Mildura Brewery Pub and the Sorrento Brewhouse on the Mornington Peninsula.
The company's latest quarterly report released on July 31 said while outflows had been curbed, ''the company expects that it will continue to have negative operating cash flows in the short term''.
Broo also said in the report the ''board is currently considering various funding options'' and would update the market accordingly.
An extra $400,000 came into the coffers from a share placement in the three months ended June 30.
Broo initially listed on the ASX via a $10.5 million capital raising at an issue price of 20. Many of its shareholders took up stock in 2011 when Broo was an unlisted public company. They were each handed 10 free shares after buying a carton of Broo beer in a special promotion designed to accelerate sales at the company.
Broo was founded in 2009 by Mr Grogan, who remains the group's largest shareholder with a 67 per cent stake.
-Australian Financial Review