“Bega Cheese shares buckle after higher farmgate milk prices put pressure on full-year profit
Bega recently purchased the Koroit dairy processing facility for $250m. Picture: Chloe Smith.
Shares in Bega Cheese have plunged to below $5 for the first time almost two years after the dairy producer flagged lower earnings guidance for the year ahead.
At 11.40am (AEDT) the stock (BGA) was down 12.6 per cent to $4.94, its lowest point since January 2017.
In an update to the market this morning, Bega said while its acquisition of the Koroit dairy processing facility had helped, the drought and increased farmgate milk prices had hurt its milk processing for the year.
The company said earnings for the year would be between $123 million and $130m, up from last year’s earnings of $109.6m.
The consensus forecast among market analysts stood at $135.33m ahead of today’s announcement.
“The overall reduction in the Australian milk supply pool has created significant competitive farm gate milk pricing pressure,” the company said.
“The outlook for Bega Cheese’s financial performance in fiscal year 2019 is expected to be impacted by this competitive pressure.”
It said current forecasts indicate a normalised profit range of between $44m and $48m.
Bega said it continues to forecast that its overall milk intake will be within the range of 1 billion litres and 1.1 billion litres of milk, compared to a total intake of 750 million litres the prior year.
“We are very pleased with the integration of Koroit and the forecast performance of that acquisition,” the company said.
“The integration of the Koroit manufacturing facilities and the successful milk acquisition program, particularly in the Western Region, has resulted in a seasonal build of inventory with associated funding costs.”
In July, Bega acquired the Koroit processing plant in Western Victoria from Canadian dairy giant Saputo, for $250m.
The company said that it expects an improved balance between its first and second half results for fiscal year 2019, compared to the prior year when about 65 per of earnings were received in the first half.
That was due to a seasonal inventory build associated with the Koroit acquisition, as well as strong milk procurement, Bega said.”
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