Bega Cheese saw its half-year profit plummet to $6 million due to global dairy commodity price reductions, higher milk costs and investment in growth programs.
Despite what the company called “short term challenges in 1HFY15”, Bega Cheese said it remains very positive about the outlook for dairy and for the Bega Cheese Limited business in particular.
The first half normalised EBITDA of $31.3 million was lower than the previous year, but the success of the strategic initiatives of the business were reflected in an 8 percent increase in revenues to $552.5 million and the strong growth of both the international consumer packaged goods business and the nutritional business.
Global dairy commodity price reductions of approximately 50 percent particularly impacted Bega Cheese’s wholly owned subsidiary Tatura Milk Industries Limited first half result. Commissioning costs of the new infant formula blending and canning plant at Derrimut in Victoria also impacted first half results. Volumes through the new Derrimut facility continue to grow and projected efficiency levels and costs are now being achieved.
In October 2014, the company provided guidance that the normalised full year result for FY15 would be in line with the FY14 result of $29.7 million. The company has dropped its forecast normalised full year result to a range between $25 and $28 million.
Bega Cheese continues to invest in the Milk Sustainability and Growth Program with over 90 percent of milk supplied by farms now contracted under this initiative and generating significant on-farm investment in future milk supply, including targeted growth projects with an objective of increasing milk supply by 20 percent.
On Wednesday (18 February), Bega Cheese shares dropped from $5.23 to $5.05 a share.