Bega has pointed to the purchase of its Koroit plant as one of the reasons it has reported a dive in its profit at its half-year results.
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The company is under increasing pressure from strong competition and high farm gate milk prices as the drought gripping the country dents the dairy and spread giant's profits.
Bega blamed the result on a year plagued with "short-term challenges", as it announced it would close down its mozzarella and cheddar plant in Coburg, in Melbourne's north.
Bega took a scalpel to its statutory performance measures, with net profit down 76 per cent to $5 million in the six months to December 31, and earnings before interest, tax, depreciation and amortisation (EBITDA) also down 23 per cent to $39.6 million.
On a normalised basis, Bega reported half-year profits of $18 million, down 48 per cent and EBITDA of $58 million, down 17 per cent.
Executive chairman Barry Irvin pointed to the acquisition of the Koroit facility, "slower than forecast" nutritional sales, the legal stoush Bega is in with Kraft and Fonterra, and the "significant" increases in energy and insurance costs as being among the other challenges the company faced.
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But he assured investors Bega was focused on its long-term strategies and one of its major projects, a $34 million lactoferrin extractor at its Koroit facility, while exiting the Coburg plant.
Up to 50 people will lose their jobs when the Allenby Street site closes, and while some people could be redeployed most will be made redundant.
Morgans analyst Belinda Moore said the result was weaker than her forecast of an underlying EBITDA of $64.5 million and net profit of $26.7 million.
"It was a particularly challenging period for the company and the dairy industry in general," Ms Moore said.
Bega's national milk production fell 5 per cent, or 267 million litres, in the first half as the drought impacted large swathes of land in eastern Australia. Production for the full year is expected to be down by about 600 million litres.
The dairy and spreads manufacturer will continue in the cheddar and mozzarella business by sourcing cheese from Bega's other sites and through contracted arrangements.
Investors wiped off 5.39 per cent, or 26 cents off Bega’s share price shortly after the market opened, before it recovered much of the lost ground. Shares closed 1.24 per cent, or 6 cents, higher at $4.88.
The board declared a fully franked interim dividend of 5.5 cents per share, in line with the previous corresponding period.
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