Bega Group sells Vegemite Way facility, warns of high milk prices

AUSTRALIA – Australian leading food and dairy processing company, Bega Group, has announced the sale of its Vegemite Way facility in Port Melbourne for approximately US$75.83 million.

According to Bega, after undergoing a 13-month sale process, the company is selling the factory to local property fund managers, Charter Hall, for an initial term of 15 years, with two additional five-year options.

“The funds from the sale will be used to reduce debt and bolster Bega’s strategic initiatives, as well as to transition to a company focused on market-leading brands,” the company stated.

“The deal will also strengthen its balance sheet and enable the acceleration of an organizational restructure and business simplification programme.”

It added that the restructuring, as part of the programme, will enhance the efficiency and effectiveness of its branded business and reduce costs in its bulk commodity business.

“The programme is expected to have a cash cost of approximately US$13.89 million and create annual savings of an equivalent amount.”

Bega also highlighted that the factory plans to continue the production of brands such as Vegemite and Bega Peanut butter at the site.

Bega warns of high milk prices

Meanwhile, Bega has issued a warning stating that the rising costs of dairy may lead to a non-cash impairment of between US$119.11 million to US$185.28 million.

The cheese-to-spreads manufacturer said the situation has been caused by falling milk production volumes and rising dairy ingredient prices.

Bega noted that Australian milk production had decreased by 700m litres, or 9%, over the past two years and the limited capacity had resulted in intense competition for raw milk. Labour shortages have been partly blamed for what Bega described as a continued decline.

“The precise impairment amount will be impacted by the finalization of milk procurement and [the] farm gate milk pricing programme for FY2024,” Bega said in an announcement on the Australian Securities Exchange (ASX).

“Our current anticipated non-cash impairment is in the range of AUD180m to AUD280m. We would expect to conclude the calculation as we finalize our audited result for FY2023 and will update the market when we have more clarity.”

In March, Bega announced the launch of plant-based alt-cheese products, just two months after it sold its stake in a Hong Kong-based dairy-free beverages enterprise to joint venture partner Vitasoy.

“The launch of Bega’s Plant-Based cheese is an important evolution to ensure that Bega Group is positioned to take advantage of the growing plant-based segment,” Matt Gray, marketing general manager at the company’s Bega Foods arm, said.

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