Atlas hit by undersized pearls

Atlas Pearls and Perfumes has taken a series of emergency financial measures to withstand a looming shortfall as it harvests a crop of undersized pearls.

In anticipation of a debt covenant breach, the pearl farm operator and retailer has struck a deal with its lender for continued debt facilities by providing regular auction updates and meeting forecasts.

The company last week borrowed $500,000 from Coogee Chemicals managing director Tim Martin - an Atlas shareholder and board member - as an unsecured bridging loan.

The board has been cut from five directors to three, with executive chairman Stephen Birkbeck stepping down to a consulting role.

The moves follow a flagged 15 per cent decline in revenue for this financial year, in proportion with a drop in the size of pearls to be harvested over the next six to 12 months.

"Six months of smaller pearls does punch a bit of a hole in your revenue stream," chief executive Pierre Fallourd said.

"Technically, as you go slightly smaller in size the difference in price is really strong," Mr Fallourd said.

"But the market is extremely supportive at this stage. Besides a tight cash flow situation we're going through, I'm not overly concerned and nobody should be."

Atlas operates pearl farms in Indonesia. Mr Fallourd said because of the four-year production cycle, the smaller pearls reflected a post-GFC emphasis on sourcing customers ahead of oyster shell management.

Atlas is tipping a return to historically average pearl sizes next financial year. "It's purely a temporary situation so we'll get back to normal revenue flow," Mr Fallourd said. He said a planned transition from Mr Birkbeck to himself had been fast-tracked once the state of the pearl crop became known.

Atlas' share price closed down 1.5¢, or 21 per cent to 5.5¢ yesterday, valuing it at $18 million.