Covid continues to bedevil the businesses of Bega Cheese in Australia and its key Asian markets, according to an update from the country’s largest locally owned food group yesterday.
The company has had to battle the impact of Covid on its own operations, in markets in Australia and Asia (especially China) and the impact of the record floods in NSW and southern Queensland.
Oh, there’s also the impact of the Russian invasion of Ukraine which has driven up costs – especially energy.
The company told the ASX in an update that it “continues to manage a number of one-off costs in the FY2022 year that will impact financial results.”
Principal is the more than doubling over the full year of the $20 million estimated cost of Covid at the December 31 halfway mark.
Bega said that “while there is some recovery in the market and an easing of COVID-19 associated costs, the full year EBITDA impact of COVID-19 will be in excess of $40 million.”
“While the majority of the above was expected by the company and incorporated in our previous market update, the business is now additionally managing the costs and supply chain disruption impact of flooding in recent weeks and months in Central Australia, Northern NSW and Queensland, including the suspension of rail services into these regions.
“There have been increases in input costs associated with the outbreak of war in Ukraine and now also concern on the certainty of deliveries of products destined to the China market scheduled through the port of Shanghai due to lockdowns in that city.”
The company however reckons the impact of these extra costs will largely be confined to the June 30 financial year in 2022.
On top of this rising global dairy prices and falling production in major producers is seeing something of a squeeze on milk supplies.
“The improvement in international commodity markets and decreases in 2H FY2022 national milk production have further increased competition for milk with the majority of dairy companies including Bega Cheese increasing farm gate milk prices.
“The diversity and capabilities of the Bega Cheese business have been particularly important in FY2022. The company has managed a number of external challenges while responding to opportunities particularly in the global commodity markets which are currently providing stronger returns than the Australian market,” Bega said.
That could see the company forced to sell more dairy products into global markets, placing further pressure on local product supplies.
The company also issued its first earnings guidance for the year to June, forecast ‘normalised’ earnings before interest tax depreciation and amortisation in the range of $175 to $190 million.
The company is still swallowing the Lion dairy and beverages business, but there was no mention of costs savings or how that integration is travelling.
But the shares still ended up 0.9% at $5.19 as investors ignored what was essentially a profit warning.
