Cheesemaker Bega’s successful first-half of the financial year, posted during a particularly turbulent period in Australian dairy fortunes, comes in marked contrast to the predicament of its rival its rival, Murray Goulburn.
Bega reported profits of A15.7m (US$12.1) for the last six months, more than half as much in the black as Murray Goulburn, now with a new chief executive, now finds itself in the red.
Despite its positive results, Bega has warned its shareholders that even more challenging times were on the horizon.
“I am very pleased to present a strong first half performance particularly in the context of the recent upheaval in the Australian dairy industry, a highly competitive retail environment and significant disruption in infant formula supply channels into China,” said Bega’s executive chairman, Barry Irvin.
The second-half of the year is likely to be more challenging, with end-of-year results in more in line with the corresponding period of 2016.
The last six months have also seen the listed business acquire some of Mondelēz’s brands, including Kraft products and the iconic Vegemite yeast extract.
On the other side of the scale, Murray Goulburn is reeling after it posted a loss of A$31.9m, blamed largely on the weather and a lively market.
“Record rainfalls and high levels of competitor activity have reduced our milk intake, impacting revenue and our ability to fully recover fixed costs and overheads,” said Ari Mervis, the co-operative’s chief executive.
He added that the global rise in dairy commodity prices came too late to boost first-half sales volumes, while lower cross-border sales to China had had a “significant impact” on its MG’s food division, as the retail platform stabilised after a peak in the first-half of the financial year.
Its nutritionals business was largely unchanged from what it achieved in the first-half of the year. Meanwhile, sales of ingredients fell by 9.1%.
While Bega’s Irvin was preaching caution for the next six months in dairy, Mervis and his board are predicting better things ahead.
“Improved seasonal conditions, current commodity pricing and the realisation of planned cost reduction initiatives indicate improved milk prices for suppliers. In addition, any production growth has the potential to provide further manufacturing efficiency gains,” Murray Goulburn said in a statement.
Meanwhile, infant formula supplier Bellamy’s saw most of its board depart after a protest vote whittled the non-execs down to just three directors and no chairman, after Rob Woolley resigned from the company.
The Tasmanian company’s share price has plunged recently, and it faces a shareholder class-action suit after a significant drop in sales in China twice downgraded its full-year earnings forecast.
Bellamy's chairman Rob Woolley resigned, along with director Launa Inman, just before the extraordinary shareholder meeting dumped the other board members.
Kathmandu founder Jan Cameron, the rebel stakeholder who led the revolt, was unable to take one of the vacant seats, though her aligned director candidates did succeed.
“I've just spent a couple of weeks up in China and there are indeed a lot of problems with distribution and pricing in China, and that's where we would first tackle the problem,” she told shareholders.
Rodd Peters, an ally who stood successfully, contended that Bellamy's had been failed by its board, and the company would now have to navigate a range of upcoming “difficult legal and commercial issues”.