AUSTRALIA – Bega Cheese, an Australian cheese manufacturing company, has announced plans to close its plant in Griffith, Canberra city and move operations to another site due to insufficient milk supply.
The move to Penrith, New South Wales will affect 19 employees who have been given the option to choose between redundancy packages or redeployment to other Bega factories.
Bega has been grappling with low milk supply at its Griffith site for some time now and has been sourcing milk from outside the Australian Capital Territory (ACT) to Griffith for production.
This, according to the company during a stock-exchange filing, was bypassing more efficient, sustainable and proximate production sites like the Penrith site.
“This move will allow us to maintain our high standards across product quality and customer service, utilizing the benefits of a larger full-time operation specialising in the production of fresh milk,” said Darryn Wallace, the executive general manager of Bega Dairy and Drinks.
The transfer of operation follows a difficult half-year for the Australian dairy farm with profits plunging 74% over what the company describes as high farmgate milk prices.
Having struggled to absorb the high costs, the firm’s profits fell to $7.3 million (US$4.9) compared to the $28 million (US$19.1M) recorded in the prior corresponding period.
Revenue generated increased however 11% to $1.67 billion (US$1.1B) but EBITDA decreased by 26 % to $71.6 million (US$4.8M) compared to the first half of last year.
The company’s executive chairman, Barry Irvin, said the steep change in milk prices caught them off guard.
“I was watching the market very carefully thinking farmgate milk prices will move about 20%,” he said.
“We weren’t prepared for that 30% movement, which is the fastest movement I’ve ever seen, and it occurred over a six-week to two-month period, which I have never experienced.”
According to the company’s CEO Peter Findlay the company previously implemented a staged increase in the prices on the supermarket shelf, which helped to offset the increase in raw materials.
“There were unprecedented price changes in the Australian domestic market,” he said.
Other factors such as labour shortages in the Australian dairy industry coupled with extensive flooding on the east coast as well as the inflationary pressures have led to the tumbling of profits not only in Bega Cheese but the entire Australian dairy market.
Mr Findley says he expects more facilities to close across the industry.
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