Bega Cheese: Something has to give as this isn't sustainable

About the author:

Author name:

By Belinda Moore

Job title:

Senior Analyst

Date posted:

28 June 2023, 1:00 PM

Sectors Covered:

Agriculture, Food & Beverage, Travel and Chemicals

• Pleasingly, Bega Cheese’s (ASX:BGA) higher quality Branded business is now performing strongly. However, its Bulk business is loss making due to the material fall in global dairy prices and Australian processors are overpaying for milk given fierce competition.
• The challenging operating environment for the Bulk business is likely to remain near term causing BGA to announce a new cost out program and the impairment of its assets. We have made material downgrades to our FY24/25 forecasts.
• The turnaround we expected at BGA under a new management team has now been pushed out while the dairy industry acts irrationally and therefore earnings uncertainty remains high. We move to a Hold rating.

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