Reading the presentation in depth, it's a major step change that in FY 17, BGA 'branded product' sales were only 20 per cent of total sales but four years later min FY 21, this has more than tripled to 73 per cent, so now only 27 per cent are what BGA calls 'bulk' sales.
Bulk sales revenue was adversely affected in FY 21 by the drop in demand from mainland communist China for infant formula, with total bulk sales down by eight per cent. However the slightly hyped Koroit, Victoria factory acquisition with its lactoferrin production contributing for a full year helped avoid an A2M-style 'meltdown' in this minority of BGA sales category.
I am no accountant but IIRC depreciation is a non-cash item, but irrespective at $72.9 million it takes a big chuck from EBITDA on a normalised basis.
I mistakenly said above it 'reduced net debt slightly' - actually, net debt rose by $94 million to $324.9 million, but this is less than the market may have expected as the Lion Dairy and Drinks acquisition was a big pill for smallish BGA to swallow. (Apologies for the mistake).
Cash flow was positive.
It briefly says the synergy project aims for FY 22 are 'on track' and gives a one sentence explanation of some progress to date. More detail would be desirable.
BGA states that the 'product and channel mix is affected by COVID-19 lockdowns'. This doesn't sound great. To what extent is it affecting revenue and hence profits? NSW and Victoria are in lockdown and other states have put in place various travel bans.
There is excellent detail on page 21 showing the BGA market share in major categories, although they are amalgamated. For instance 'spreads' are suggested as market share of 31 per cent but what's omitted is that in peanut butter, a small number of months ago the BGA market share was a terrific 82 per cent with its iconic yellow/red jars of standard peanut butter plus the delicious, popular premium Australian peanuts in Simply Nuts. Later on, BGA highlights how its spreads market share rose 2.8 per cent. Great!
This page 21 also shows us what the BGA brands are in what's become an extensive portolio. It doesn't show 'desserts' in which BGA brand Divine Classic (cream caramel desserts) would have a miniscule share.
A strange omission is the 'butter' category which I'd have thought would show a 'Farmer's Table' photo under 'spreads', but there's room for only four icons so perhaps that explains it. Butter is seminal to a daity products manufacturer! I've had to make a rare visit to COL to buy Farmer's Table as WOW doesn't stock it and since I cannot visit a large IGA with the five kilometre Melbourne travel restriction, I don't know if MTS' largest IGAs carry that stock keeping unit.
That BGA only has a 26 per cent share of yoghurt sales tells me there's potential for it to grab a bit more market share against USA-owned Chobani/Gippsland Dairy. Don't be conned: latter is not an Australian-owned brand.
It's pleasing that there is growth in almost all categories that BGA shows on that page 21. However I thought fresh white milk sales had benefited from COVID_19 more than the 0.4 per cent category growth (i.e. for all manufacturers, not just BGA) in FY 21.
Export revenue grew 18.8 per cent: amazingly good. Shipping lines are often running late and on occasion if there are say three port calls scheduled in Oz - first Sydney, then Melbourne and finally Brisbane, or Adelaide/Melbourne/Sydney, I have observed it's not infrequent for them to skip one port to try to regain some of the timetable, just like a train suddenly running express. The other problem is that the shipping lines have import containers (to Oz) unloaded but to again try to improve punctuality, they may not take empty containers back to mainland China or elsewhere in Asia. I don't know if some export product is left on the wharves for a later voyage.
The other problem is that shipping lines may have increased the rate per TUE (container). They've certainly done that for import containers with surcharges for 'peak season' from 1 September as much as US$750 or even IIRC US$1000 for a 6.1 metre (20') or 12.2m (40' long) container.
On page 30, the comment that 'farm gate milk price increases above market in some product streams' is a concern. Hope it's sustainable. No good paying too much per kilogram for milk solids if the resultant products BGA manufactures become unprofitable, if I'm reading the comment correctly.
An elephant in the room is the potential for COVID-19 to shut down multiple BGA production sites. Hasn't yet occurred. My prayer is that it won't.
Overall, a very pleasing report.
BGA Price at posting:
$5.51 Sentiment: Hold Disclosure: Held
(20min delay)