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Australia-based dairy and cheese company, Bega Cheese Limited (ASX:BGA) has released its interim financial results for the half year ended 30 December 2018. For the half-year period, the company has reported Revenue from ordinary activities of $649.164 million which is six percent higher than the corresponding previous period (pcp). However, the companyâs Net profit has declined by 76% to $4.993 million as compared to pcp.
While commenting on the half-year results, the company Executive Chairman Mr. Barry Irvin told that the first half results are successful from a strategic perspective, but the business has been impacted by some short-term challenges.
Mr. Barry informed about the impact of the higher farm gate milk prices which were driven by the increased competition for milk due to the drought which significantly reduced the milk supply. Moreover, the milk price pressure, a lag in the timing of sales has impacted first half performance and inventory levels, which has resulted in higher working capital and borrowings in the half-year period. Currently, the company is focusing on creating efficient and cost-effective operations and leveraging its brands locally and overseas.
In August 2018, the company announced the acquisition of the Koroit Facility in Western Victoria and the company also announced that it will invest $34 million on the construction of a lactoferrin facility on that site. During the period, the company entered into a third-party cheddar and mozzarella toll manufacturing agreement which allowed the company to continue to grow its business while avoiding additional capital expenditure and retire less efficient assets.
During the half year period, the company incurred various one-off transaction costs relating to the acquisition of the Koroit Facility and other corporate activity totaling $18.6 million before tax, which has been normalized in the result for the period.
In 1H FY19, the Bega Cheese segment generated normalized EBITDA of $31.5 million which is 1% less than pcp. Further, the Bega Cheese segment reported normalized PAT of $1.4 million in 1H FY19 which is 85% less than pcp.
In H1 FY19, the Group statutory net cash outflow from operating activities was $128.3 Mn compared to the net cash inflow of $5.4 million in the previous corresponding period.
It is expected that the FY 2019 financial performance of the company will be impacted by competitive pressure. In FY 2019, the company is expecting its normalized EBITDA to be in between $123.0 Mn to $130.0 Mn, compared to the FY18 normalized EBITDA of $109.6 Mn.
The companyâs Board has declared an interim dividend of 5.5 cents per share, in line with the interim dividend of the prior period. The interim dividend will be paid on 16 April 2019.
Meanwhile, in the last six months, the share price of the company decreased by 37.40 percent as on 26 February 2019. BGAâs shares traded at $4.790 (-0.622% intraday) with a market capitalization of circa $1.03 billion as on 27 February 2019 (AEST 1:38 PM).
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