Australia’s biggest food group Bega will find out today if its ambitious expansion plans in the food sector in the past three years can proceed or face an immediate dead end.
The company will find out from a ruling in the Victorian Supreme court if it can use its own name when branding its products.
Bega told investors at its interim results on Wednesday that Victoria’s Supreme Court will hand down a ruling on the dispute, which centres around a 2001 licensing agreement Bega granted to NZ and local dairy giant, Fonterra, allowing it to use the Bega trademarks in Australia on its cheese and butter products.
Bega has tried to overturn the agreement but Fonterra has countered with a legal challenge that looks to stop Bega from using Bega trademarks in Australia on products outside of the licensed products without its consent.
Bega said in a statement to the ASX that “Bega Cheese, as owner of the trade marks, has opposed Fonterra’s position and asserted its rights to use its trade marks in Australia. Bega Cheese has also made various counter claims in respect of alleged breaches of the licence by Fonterra.”
Bega has bought Vegemite and associated brands, developed a range of peanut butter products, has hone products and has a range of dairy products bought from Lion Nathan (although most of those have their own strong brand names).
“Bega Cheese will promptly review and seek legal advice to assess the judgment and make any further market announcement in accordance with its continuous disclosure obligations,” the company said on Wednesday.
Investors shrugged off the news, sending the shares up more that 8% at one stage yesterday before they settled back to around $6.25.
The company reported a 5% fall in revenue to $708 million for the first half of fiscal 2021 but a 154% jump in statutory profit after tax to $21.7 million, with Bega seeing the benefits of a restructure initiated by the business last year.
Bega also acquired fellow dairy company Lion Dairy and Drinks in a half-a-billion acquisition last year which is expected to boost the company’s sales and earnings from later this year.
An unchanged interim dividend of 5 cents a share will be paid.
And buried in the report and accounts was this statement “Subsequent to 27 December 2020, one of the Group’s major customers notified the Group that a contractual arrangement will cease in October 2021 prior to its original end date of December 2026. To compensate for the loss of future earnings, a contractual termination fee of $21.1 million is expected to be received across FY2021 and FY2022. The Group is currently considering any potential implications of the termination.”
The client or deal was not identified.
