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Bega Cheese cuts guidance over drought

Bega Cheese has cut its full-year earnings guidance after the drought and exit of many farmers from the dairy market led to competitive pressure it says “has never been stronger”.

The dairy processor on Friday said it increased its milk intake for the 12 months to June 30 by 41 per cent to a record 1.06 billion litres, in a market that shrank by 733 million litres.

Bega said it had incurred extra costs in the last financial year, with more to come in FY20, as it pursues greater production and logistics efficiency.

Bega now expects normalised earnings before interest, tax, amortisation and depreciation of between $113 million and $117 million, compared with the $123 million to $130 million forecast at its half-year results announcement.

“There has … been greater competitive pressure from processors and this pressure has never been stronger than in the last quarter of FY2019 and in setting the FY2020 milk price,” Bega Cheese said in a statement.

Bega has also been seeking to diversify beyond dairy, most notably through 2017’s purchase of a suite of products that included Vegemite. Bega shares were valued at $4.43 before the start of trade on Friday, down 46 per cent since October 2017.

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