Sector News

Bega Cheese doubles profit as CEO heads for the door

August 25, 2016
Food & Drink

Dairy company Bega Cheese has shrugged off challenging market conditions to report a doubling of profit for the full year as the group announced the retirement of its chief executive.

The ASX-listed group said its net profit surged 132 per cent to $28.8 million in the 12 months to June 30 on the back of a 7.5 per cent rise in revenues to $1.2 billion.

Bega (BGA) said its earnings before interest, tax, depreciation and amortisation (EBITDA) lifted 56 per cent to $65.4m, while its underlying profit after tax rose a more modest 33 per cent to $29.2m.

The discrepancy between underlying and net earnings was partly linked to reduced costs from its Milk Sustainability and Growth Program, with the net cost falling from $13.7m to $0.6m.

The positive showing came despite a year of tumult in the dairy industry as a global glut forced prices down. The greatest impact was seen at Bega rival Murray Goulburn, which announced a shock retroactive price cut to farmers and saw its chief executive and finance officers head for the exit.

The Murray Goulburn move was met with derision from farmers and Canberra alike but was quickly followed by a similar, if not quite as severe, price cut from Fonterra.

Bega executive chairman Barry Irvin said the result was a strong one given the market circumstances.

“Bega Cheese’s strategy of consistent and controlled investment in infrastructure and capacity is demonstrated in the stability of our business and our ability to respond to volatile market circumstances,” he said.

“It is a reflection of both our values and strategy that the company maintained its commitments to our dairy farmers while achieving strong revenue and profit growth.”

The group produced 238,000 tonnes of dairy products for the year, a 6 per cent improvement on the prior year.

Another year of growth is tipped for fiscal 2017, although Bega opted against providing specific guidance.

“We expect continued revenue growth and improved financial performance in FY2017. Bega Cheese continues to maintain a strong balance sheet and the company is well positioned to grow its business both organically and through acquisition,” Mr Irvin said.

The result corresponded with news current chief executive Aidan Coleman would step down in January.

“Aidan has done a wonderful job as CEO of Bega Cheese over the past five years,” he said.

“We wish Aidan all the best in his retirement. Bega Cheese is well advanced in the recruitment process and Aidan will work with us to ensure the transition to new leadership is seamless.”

Bega declared a final dividend of 5c a share, bringing total dividends to 9.5c for the last 12 months. The total payout for the year is up 1c on the prior period.

By Daniel Palmer

Source: The Australian

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