WCB windfall behind record Bega profit

BEGA Cheese turned over more than a $1 billion in the 2013/14 financial year, yielding a record profit.

The NSW-based company generated 6 per cent growth, boosting revenue by $65 million for the year.

Profit after tax was $66 million, an increase of $40.6 million on the previous year — a result heavily distorted by the windfall from the takeover battle for Warrnambool Cheese and Butter (WCB). 

Bega bowed out of the battle and sold its WCB shares to Saputo for $99 million, generating a profit before tax and costs of $66 million.

But even when this is taken out of the calculation, profit was still a record $30 million, an increase of 15 per cent year-on-year.

The figure is 42 per cent higher than the $21.1 million profit announced by its slightly larger rival WCB this week.

Announcing the results yesterday, executive chairman Barry Irvin said the result was helped by strong dairy commodity prices, particularly in the first half of the season.

“Continued growth in our nutritionals business and a decrease in volume through the cheese cutting, packaging and processing also contributed to the strong result,” Mr Irvin said.

“These high value products were largely destined for Asian markets, with growth coming from investment in infant nutritional canning at Derrimut as well as strong demand for high quality lactoferrin produced at Tatura.”

He said strong rivalry for milk supply meant that the cost of raw milk was high, but the company’s diversified business and shift towards high value products allowed it to increase profit despite the high milk cost.

Bega owns plants in its home town, Tatura Milk Industries in the Goulburn Valley, a factory in Coburg and a packaging plant at Derrimut, while also taking in extra supply through milk swap contracts. 

Tatura dominates its milk intake, accounting for 343 million litres of its total 729 million litre supply last season.

The company’s profits avoided a substantial hit following a favourable outcome of an appeal to the Australian Tax Office earlier this year.

The tax office had earlier demanded $13 million in tax due to a technicality regarding company structure when Bega part-owned Tatura Milk Industries but the demand was successfully appealed.

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