Bega Cheese has taken a huge hit to its bottom line, with profits almost halving in the first half of the 2018-19 financial year as a result of the poor season and the purchase of Saputo’s Koroit factory.
The company said the figures, which were revealed in its half-yearly results last week, were a result of milk price and milk volumes in some regions, slower first-half sales in nutritionals, a significant build in inventory and costs associated with the acquisition of the Koroit milk plant, and corporate costs.
Despite revenue increasing by six per cent to $650million — a result of increased milk volume because of the Koroit factory acquisition — profit after tax was still slashed by 48 per cent to $18.9million.
‘‘While the first half has been challenging and the business is impacted by acquisition and corporate costs, sales timing and milk support pressure, our strategic focus remains robust and the positioning of the business strong,’’ executive chairman Barry Irvin told investors last Wednesday.
‘‘As is always the case we believe it is appropriate to review the business from a normalised perspective.’’
The company is projecting an overall milk intake of one to 1.1billion litres in 2018-19, following a ‘‘record milk intake’’ of 641million litres in the first half of the financial year, an increase of 55 per cent on the year prior.
However, milk intake from direct suppliers to Tatura Milk totalled 223million litres, a decrease of six per cent, while milk intake from third parties reduced by 40 per cent to 223million litres as a result of drought.
‘‘While it has been pleasing to have such a successful milk procurement program, the impact of the drought has been significant in terms of both supply and competition for milk, particularly in northern Victoria,’’ Bega Cheese chief executive officer Paul van Heerwaarden told investors last Wednesday.
A record 645million litres was processed in the first half of the financial year, up 41 per cent and 189million litres on the previous year.
The first half of the financial year figures come as Bega Cheese announced its Coburg facility would close its doors immediately.
The company said the decision was made following a review of Bega facilities, which concluded ‘‘the Coburg site’s capacity and city location cannot viably support Bega’s expected future growth’’.
The company said redundancies would occur, although some staff would be offered employment at other sites.
The facility, in Melbourne’s northern suburbs, was acquired by Bega in 2009 and has manufactured cheese for Bega’s private label and food service cheese business.