Cer Group preserves cash flow 

Organic products manufacturer CER Group has put strict cost controls in place "to safeguard the group's future" and preserve cash flow.

The company said it had cash reserves of $700,000 at June 30 and a further $900,000 of lines of credit in place. A full set of accou nts was not available from NZX on Monday morning.

"The directors believe that the group has sufficient cash on hand and capacity to meet its trading requirements," the company said in a press statement on its interim accounts.

The company is reviewing all of its businesses and has developed concerns about the sustainability of the income base of the VRM business it bought last August.

In February the company reported its December year net loss widened to $339,000 from $99,000 in 2006.

Today it said sales revenues grew 13% over the first half of 2007 and it disclosed provisions for $5.8m.

Revenues from biological control and remediation businesses, VRM and Certified Organics, grew by 19% to $1.1 million, of which about $500,000 was contributed by VRM.

The concerns about VRM relate to its dependence on sales of its bio-fertilisers to Queensland sugar growers.

"Following a prolonged period of higher than expected rainfall in the major growing area, Northern Queensland, and this year's pronounced squeeze between low sugar prices and rocketing fuel and chemical costs, the sugar market has become significantly depressed; prospects for sales in the critical forthcoming spring season are now significantly in doubt," the company said.

The board has reviewed the goodwill from the acquisition and decided to make a provision $5.8m to cover it and also problems encountered by the Certified Organics operation.

"The group is now of the view that the lack of sales revenue development will mean that the profits in this business (VRM) will fall significantly short of the $A1 ($NZ1.23) million contemplated at the time of acquisition."

While Certified Organics had struggled to develop business outside its core contract with the Government of South Australia. The business faced higher costs generally and its market was unpredictable in drought affected regions.

CER Group also owns The New Zealand Nature Company, a multi-channel retailer of natural products, which it said was performing strongly.

New Zealand Nature delivered 10% growth in sales on the back of growth in domestic sales.