October 29, 2019
Bega Cheese shares finished down 12.8 per cent at the close of trading on Tuesday after the company – which owns PCA in Kingaroy – issued a profit warning to the exchange.
CEO Paul van Heerwaarden issued a statement to the ASX saying that unprecedented competitive milk supply conditions and easing demand from third party branded business had changed Bega’s profit outlook for the year.
He said the company predicted earnings before tax would be in the range of $95-$105 million for the 2019-20 financial year, down from $115 million over the previous period.
“The effects of the continuing drought and further decreases in total Australian milk production has escalated competition for milk in Q1 FY2020,” he said.
“This competition has flowed through to a higher ongoing cost of milk across the industry.”
As well, Bega has been hit by a softening in demand for products for some export markets.
The profit warning follows a strong FY2019 for the company, which generated a record revenue of $1.42 billion, up 13 per cent.
Export sales also rose 4 per cent to $442 million.
Speaking at Bega’s AGM on Tuesday, Mr van Heerwaarden said Bega’s new “Simply Nuts” peanut butter brand, made with 100 per cent Australian peanuts sourced from the Kingaroy facility, had strong momentum heading into FY2020.
“Kingaroy continues to play an important strategic role by providing high quality Australian peanuts as an ingredient for peanut butter and snacking products,” he said.
“The ‘Picky Picky’ nut snacking product range is now available in Coles and the Dairymont food service brand was also relaunched during the year into the domestic market.”
However, Bega’s legal battles with Kraft over the design of its peanut butter containers continues.
“In May this year, the Federal Court of Australia ruled on Bega Cheese’s right to continue to use its trade dress associated with the peanut butter products acquired from Mondelez. Legal proceedings continue as a result of an appeal by Kraft,” Mr van Heerwaarden said.