Release Date: February 20, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Bega Cheese Ltd (ASX:BGA, Financial) reported a substantial improvement in first-half normalized EBITDA, with a $33.8 million increase compared to the previous year.
- The company successfully implemented strategic plans, leading to strong brand performance and revenue growth, particularly in the bulk business.
- Bega Cheese Ltd (ASX:BGA) increased its first-half dividend to $0.06 per share, reflecting improved financial performance.
- The company has made significant progress in cost-saving initiatives, offsetting two-thirds of the cost inflation impact.
- Bega Cheese Ltd (ASX:BGA) is optimistic about international growth opportunities, particularly in Southeast Asia and the Middle East, with increased on-ground presence and direct sales strategies.
Negative Points
- The pricing environment remains challenging, with less than 1% pricing growth in the first half, impacting revenue growth.
- Cost inflation continues to affect the business, particularly in areas like labor, electricity, cocoa, and coffee.
- The bulk segment's profitability is still below historical averages, despite recent improvements.
- The company faces headwinds in the out-of-home consumption sector, affecting food service growth.
- There is uncertainty regarding the impact of potential changes in the global dairy supply and demand dynamics, particularly with China's market behavior.
Q & A Highlights
Q: Can you provide insights into the guidance for the second half, considering the strong first-half performance and the challenging environment?
A: Unidentified_3: The pricing environment will remain challenging in the second half. We expect the branded result to follow previous patterns, representing just over 50% of the full year. We anticipate a branded result around $205 million, plus or minus a few million dollars. We will continue to support our brands with a similar marketing spend as the first half, despite the challenging consumer environment.
Q: How do you see the bulk segment performing in the second half, considering the FX benefits and inventory levels?
A: Unidentified_2: Commodities have increased by about 15% since the start of the year, with 6% driven by FX. We've sold 60-70% of our bulk product, with high fat areas sold even more. We expect to have the year sold by March and are comfortable with the revenue and profit margins. The bulk business is first-half loaded due to higher factory recoveries during the spring flush.
Q: What is the outlook for the farm gate milk price, and how might it impact the second half?
A: Unidentified_1: We believe our farm gate pricing is fair and competitive. We don't expect further movement in farm gate milk pricing this year. However, if the environment remains the same, we might see an improvement in opening prices next year, reflecting current commodity prices.
Q: Can you elaborate on the capital and efficiency programs and their expected returns?
A: Unidentified_2: We aim for a 3-year payback on capital investments, with a focus on cost-out projects where there's more certainty. We align growth projects with key trends and strategy, targeting high-profit categories. We see significant cost-out opportunities over the next three years, potentially more than in the first two years.
Q: How is the international business performing, and what are the growth prospects?
A: Unidentified_2: The international business, particularly in Southeast Asia, is performing well. We see significant opportunities in markets like Thailand, Malaysia, Indonesia, and Vietnam, where middle-class populations are growing. We're focused on cream cheese, processed cheese, and yogurt, and expect this to be a significant part of our business in 5 to 10 years.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
