Bega Cheese (BGA) shares fell 5% at one stage yesterday after the company downgraded its earnings outlook for the year to June 30, joining the NZ giant Fonterra (FSF) in recognising the impact of the slide in global dairy product prices in the past year.
Fonterra has already revealed a series of cuts to the milk products price the country’s dairy farmers will receive – they are down close to 50%, and the company has already trimmed its dividend payments forecasts for holders of securities in its listed fund.
Warnambool Cheese and Butter (WCB) is another listed dairy stock (controlled by the Canadian group Saputo) which has cut its guidance because of the fall in global prices and demand.
BGA vs FSF 1Y – Dairy boom ends for Bega, Fonterra
Bega yesterday blamed the slide in global prices and the impact that is having on the value of its stocks of dairy products which will have to be written down as well.
Bega said it expected profit for 2014-15 to be between $21 million and $24 million, down from previous guidance of $25 million to $28 million.
“The lower than forecast result for FY115 reflects the impact of a weaker recovery in global dairy commodity prices than was previously expected by the company,” Bega said in its statement to the ASX.
“While there has been some recovery in February/March, the expected continued improvement in pricing has not occurred and price improvement has not been maintained."
Fonterra holds a global auction every second Tuesday. At the auction of NZ dairy products held on May 5, the Global Dairy Trade Index fell 3.5% to $US2,515 a tonne. In February the index jumped by just under 10%, but has resumed falling in subsequent auctions. The latest auction (overnight) saw a fall of 2.2% in the index to $US2,472 a tonne).
The index has more than halved since peaking in early 2013. Bega shares ended down3.7% at $4.69.
