Bega Cheese shares tank on sour outlook

Bega Cheese’s share prices have nosedived after the ASX-listed food giant outlined a raft of ongoing issues that are expected to hit its bottom line this financial year.

In a trading update on Thursday morning, the company said it was still grappling with a number of challenges, only some of which have been triggered by the COVID-19 pandemic.

Bega shares slipped over 12 per cent to $4.93 on the back of the sour outlook. They closed the session 10.3 per cent weaker at $5.04.

“These impacts have been extensive and significant ranging from market disruption in Australian food service channels as a result of lockdowns, structural change in the Chinese infant and toddler dairy nutritional market, significant operational disruption including factory shutdowns, major changes to operations and logistics scheduling, increased safety and testing regimes, major cost increases and shortages across the entire supply chain,” Bega told the market in a statement.

The company also expects milk supply to be “flat to declining” amid high competition, with farm gate milk prices set to rise higher.

While Bega said factors such as “improved market returns”, the end of some “one off costs” should help it navigate the current headwinds, the company is bracing for turbulent trading conditions for the rest of the financial year.

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“The timing of both price increases and the removal of COVID-19 related costs will affect business performance in FY2022.”

The company expects normalised earnings before interest, tax and depreciation of somewhere between $195 million to $215 million for the current financial year.