Bega Cheese has posted record revenue and increased profits despite challenging COVID-19 conditions.
- The acquisition of Lion Dairy and Drinks added $787m in revenue
- COVID cost the company more than $20 million due to a variety of factors
- Chairman Barry Irvin said farmers were still leaving the dairy industry despite a positive medium-term outlook
Buoyed by the recent acquisition of Lion Dairy and Drinks, which effectively doubled its size, the company increased revenue by 113 per cent.
In the past six months Bega increased profits by 20 per cent to $35.5 million on a normalised basis.
Chairman Barry Irvin said he was pleased with the result considering the challenges the processor had faced.
“Our revenue is at a record high for the first half up to $1.5 billion and with a statutory EBITDA of $97.2m, normalised to $106.4m.
$20m COVID hit
Chief financial officer Peter Findlay said COVID cost Bega Cheese more than $20m “across a variety of different areas”.
“Absenteeism, testing programs, additional logistics costs to ship product around, loss of margin just due to customers being closed, and a number of other ancillary costs such as cleaning and security,” he said.
“What really hit us in January was the spread of the Omicron virus.
“We do think that we’ll incur more costs for the remainder of the year … which we expect will be in excess of $40 million in the full-year results.”
Milk price outlook
Strong global commodities, favourable seasonal conditions and fierce competition between processors are giving farmers reason to be confident about their short- to medium-term prospects.
“I think we’ll see a pretty solid return for farmers in the medium term,” Mr Irvin said.
“We’re actually pleased to see strong prices for farmers, because you know that will generate profitability with which to ideally generate milk.
“We have seen some level of consolidation in the processing sector and I expect that to continue, but I also expect to have robust competition for some period of time.”
Despite these positive signs, Mr Irvin said there were still farmers leaving the dairy industry.
“The alternate use of the land, particularly the beef industry, where for the first time in many, many years we’ve seen dairy farmers tempted to have an easier life and run beef cattle,” he said.
“What you would normally see in a circumstance like this, with pretty strong prices and a pretty good season … you would see supply grow and we aren’t seeing that growth.
“We would we would say that that is more down to exits and alternate uses.
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