PwC and Ashurst looking into misconduct at Freedom Foods

ASX-listed Freedom Foods has called in consultants from PwC and lawyers from Ashurst to investigate potential fraud within the company. 

On June 26, shares of Freedom Foods were suspended for 14 days from trading on the ASX, providing the company the room to investigate a range of financial misconduct allegations. PwC and Ashurst have been asked to conduct an in-depth study into the matter, and to advise on the company’s financial position. 

Late May, Freedom Foods revealed that it had spotted irregularities during a detailed review of product offerings and warehousing stock. The firm’s CEO announced that the supplier of well-known food brands such as Arnolds’s Farm, Barley+, Brekky Heros, Heritage Mill and Freedom Classic needed to write down about $25 million of inventory in FY20. 

However, on Thursday last week after the market closed, the company confirmed that it will have to write down an extra $35 million of inventory. Meanwhile, Freedom Foods also shared that it will have to increase its reserves for doubtful debts. 

In May, the company said it took a provision of about $4 million for doubtful debts. But now, a further negative impact of about $10 million on its EBITDA (earnings before interest, tax, depreciation and amortisation) has surfaced, adding to its financial pressures. 

In a tele briefing accompanying its financial statement, the Executive Chairman of Freedom Foods Perry Gunner said that PwC and Ashurst will take a thorough look at the firm’s operations to uncover what went wrong, and stressed that the company’s major shareholder, the Perich family, fully support the food manufacturer. 

The run of bad news has seen both the CEO and CFO, Rory Macleod and Campbell Nicholas, stand down from their roles. In a surprise move, CEO Macleod decided to go on leave for an indefinite period, while Nicholas resigned and left the firm.