Bega earnings to take a hit following higher milk costs

Dairy giant Bega Cheese expects earnings to take a hit as it has had to hike the price it pays farmers for milk due to the volatile drought conditions and increased competition.

Bega now expects earnings for the 12 months to June 30 to drop up to 17.4 per cent, with normalised EBITDA of between A$95 million and A$105 million.

“This higher milk price will directly impact Bega Cheese’s earnings in FY2020. This has proven to be the case, but at a faster and deeper rate,” Bega Cheese chairman Max Roberts said.

Roberts said in a statement to the ASX that dairy industry conditions contributed to 2018’s 59 per cent decline in full-year profit and is continuing to impact FY2020.

The dairy company said it is making sure that its brands are well protected amidst the turbulent conditions.

“Bega Cheese is proactively responding to increased milk competition and we will continue to manage our supply chain for domestic and international trade to mitigate further downside risk,” Bega chief executive Paul van Heerwaarden said.

The Vegemite owner said that its well known brands are still growing but that overseas demand has declined. It announced plans to restructure its manufacturing capacity as it continues to review its supply chain and overhead cost.

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