I really like how BGA was able to publicly confirm that the purchase of Lion Dairy and Drinks was formally assessed as a 'bargain purchase' with that 'bargain' being A$70 million. Mengui Dairy in China (whose purchase was disallowed) must be spitting chips. Thank you, Federal Coalition Government's Treasurer Josh Frydenberg and the Foreign Investment Review Board.
The property portfolio alone acquired is worth A$400 million, yet the total purchase cost was under A$600 million despite including well known Australian brands.
That the gradual realisation of synergies is 'on track' is very pleasing, as 'HC' esteemed contributor TillLindemann and I had pointed out this would not be instantaneous.
I didn't know until today that the Morwell, Vic yoghurt plant (Yoplait et al) has been or is being expanded (as last I knew some years ago it reduced its headcount).
Great that Paul van Heerwaarden, MD/CEO was able to say BGA has a 'dominant market share' in some ranged categories.
Mention of the corrupt 'United Nations' and its virtue signalling is one small part it could have dropped. The less attention paid to it, the better.
The Chairman emphasised 'milk, citrus and peanuts'. It's easy to forget the latter two. BGA is not just a dairying company, as iconic brands like Vegemite attest. B Honey and Bega peanut butter plus that great Simply Nuts peanut butter are important parts of the portfolio, although B Honey is embryonic (but it's stocked by Oz's leading supermarket chain, WOW).
The 'structural change' highlighted in relation to mainland China is something that won't be welcomed by competitors such as A2M. BGA has far more international geographic diversification.
At the AGM, Chairman Mr Barry Irvin answered questions.
Mr Irvin said that in relation to the DRP, uninvested dividends were not carried forward due to an error. They will be rolled over to the next dividend.
The local Kamarooka brand is still owned. It's sold in the BGA Bega Heritage Centre.
The Board is very proud of the brands acquired. The first thing BGA does is whether an acquisition fits the business model and is commercially appropriate. The question was about Arnott's Biscuits.
A holder said that the prices BGA offered to milk suppliers around Tatura were uncompetitive. Mr Irvin said Northern Victoria's milk supply profile has changed with a lot more market milk. Mr Irvin did not agree that the prices BGA paid were uncompetitive. BGA does not offer special deals, but the same opportunity for all. It wants Tatura to process high value dairy products. It is investing in Tatura: infant formula and cream cheese. Good opportunities there.
Re the 'climate change crisis' (activist's question), Mr Irvin said that the goal setting around Scope i and Scope 2 was important while the focus on circularity at BGA addressed Scope 3.
A corporate shareholder said that ordinary mild block cheese was not available in her local supermarkets. Mr Irvin said BGA still produces it but reality is supermarkets decide what products they want to stock. Mr Paul van Heerwaarden, MD/CEO said Colby would be similar. If Tasty is too salty, the Kameruka tasty cheese available in the BGA Eden NSW Heritage Centre is an option.
A holder said all those who held shares should familiarise themselves with all BGA brands to buy and support the company. Mr Irvin said 'a wonderful array of products.' This is important: for instance how many know that creme caramel dessert Divine Classic in its orange packaging available at WOW/MTS' IGAs/COL in the chilled dairy section is a BGA line?
A holder said rail freight often had lower emissions compared to road and asked re BGA's use of rail freight through rail operators such as unlisted Pacific National, listed QUB or unlisted SCT. Mr Irvin said BGA's fresh chilled products were often sold in the region in which they are produced. BGA uses rail freight to Adelaide and across the Nullabor to Perth. It is continuing to review this re other regions (impliedly such as Melbourne to Brisbane/Cairns).
Container shipping delays are well documented. BGA has been managing this impact well. Dairy commodity prices have been strong, so there is some opportunity to recover costs. Paul van H said that the full impact on costs has yet to come through due to existing (shipping freight) contracts but he believes costs will often be able to be recovered.
BGA imports some packaging. In some cases, it has had to use air freighting for high value items. The team is doing a tremendous job. BGA's customers have also been very accommodating as most if not all are suffering similar problems.
A holder asked re how Fonterra's Australian businesses may be up for sale. Mr Irvin said there had been speculation in the media, but it was not appropriate to make any comment as he was not fully aware of Fontrarra's intentions. ('Data Room' in 'The Australian' - Bridget Carter - has suggested an IPO is likely).
A holder asked 'why doesn't the share price of BGA increase?' Mr Irvin said not within our control. It was up to investors.
Re the word 'Bega' possibly appearing more on labels, a holder asked if this was being considered or whether it would confuse consumers. Mr Irvin said BGA did not want to confuse shoppers. From a broader perspective, though, BGA wants consumers to understand the family of brands. BGA has not concluded a view on this. It doesn't want to lessen consumer knowledge of existing brands.
Bonox is a unique product attracting an ageing demographic: customer base is declining for it.
At the election of Directors, a candidate, Ms Raelene Murphy said that she was confident that the market (i.e. the ASX) would recognise the value of BGA brands.
Another candidate, Mr Richard (Rick) Cross reminded us that BGA had transformed into a company with about 73 per cent of sales in branded products. This is really important. The phone call from Toolamba, northern Victoria failed for a couple of minutes (where Mr Cross has been a dairyfarmer for 30 years).
Overall, a very positive meeting although the last item, the change to allow only virtual meetings, ought have been dropped as many shareholders were not in favour. Other companies have dropped such proposed amendments.
No disappointing updates, even though undeniably COVID-19 is a challenge. BGA is navigating its exports a lot better than A2M!
(20min delay)