Bega Cheese Ltd
(ASX: BGA) has reported its half year result to 30 December 2018.
Bega is one of Australia’s largest dairy businesses, it has been producing dairy products since 1900. These days it usually sells more than 1 million packs of cheese a day across a variety of brands. Its brands includes Bega, Vegemite, Bega Peanut Butter and ZoOSH. It also owns Tatura, which is a producer of infant formula and cream cheese.
What Bega Cheese Reported
Bega Cheese said that its revenue increased by 6% to $649.2 million, with its milk production growing by 9%.
Including the Koroit dairy processing facility acquisition, reported EBITDA dropped by 23% to $39.6 million (click here to learn what EBITDA means) and net profit after tax dropped by 76% to $5 million.
However, ‘normalised’ results also saw EBITDA drop by 17% to $57.9 million and net profit fall 48% to $18.9 million.
Direct supplier milk intake was down at Tatura Milk by 6% due to drought conditions, but it also had to pay more per litre of milk, along with higher energy and insurance costs. That’s why Tatura Milk’s net profit was down 33% to $18.1 million.
Bega Cheese also announced a new strategic partnership with Bubs Australia Ltd (ASX: BUB) and that it was closing the Coburg facility that produced cheddar and mozzarella cheese because it could not viably support Bega’s expected future growth.
Bega Cheese Dividend and Balance Sheet
Bega Cheese declared a dividend of 5.5 cents per share, which is in line with the same dividend payment as a year ago.
Operating activities cash outflow was $128.3 million. Bega Cheese saw its net debt increase by $222.6 million to $468.1 million due to the Koroit Facility acquisition.
Bega Cheese Management Comments
Bega Cheese Executive Chairman Barry Irvin said: “The impact of the higher farm gate milk prices as a result of increased competition for milk due to the drought significantly reducing milk supply has been material in our business but stood us in good stead in retaining and attracting supply.”
Is Bega Cheese a buy?
Although the Bega Cheese share price is up 2% today, it’s down 36% over the past six months, so this result wasn’t much of a surprise.
A lot of the negatives in the report seem to be fairly short term, so Bega may be able to make a recovery over the next 12 months, but it’s not at the top of my watchlist at the moment. Instead, I prefer some of the proven shares in the free report below.
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