Bega Cheese: Australian supermarket favorite sounds profit warning

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The Covid pandemic has wreaked havoc on a business behind a number of iconic Australian pantry items as its share price plummets.

Investors dumped Vegemite owner Bega Cheese after the company reported the pandemic had slashed its profits.

Shares of the Australian supermarket favorite fell more than 13% on Thursday – making it the worst performing stock on the ASX 200 – after reporting that Covid lockdowns and chain bottlenecks supply had adversely affected its performance.

Bega’s drop to $ 4.84 wiped more than $ 230 million – or 24 million blocks of Tasty Cheddar – from the company’s value in just hours.

In addition to aftershocks from Covid, the dairy, spreads and drinks giant said stiff competition for milk had forced it to pay higher farm gate prices, as the Chinese market restructured foods for infants and toddlers had also been shown to be a disruption.

“The company has focused a lot on managing the cumulative effect of direct and indirect costs associated with Covid-19,” Bega told investors in a statement.

“Some of the impacts will be offset by improving market returns and stopping a number of one-time costs; However, the timing of the price increases and the removal of costs related to Covid-19 will affect the performance of the company in fiscal year 2022. ”

Bega said he now expects normalized earnings to be between $ 195 million and $ 215 million for fiscal 2022.

While that may ultimately represent a 51% increase from the $ 142 million reported in 2021, the new figure is below what analysts expected.

Bega also said he expected the upward pressure on farm gate milk prices to persist for the remainder of the year, reflecting high global dairy prices and limited supply.

Bega has lost a quarter of its value since reaching a multi-year all-time high in March thanks to the closure of international borders.

The decline in the stock price comes even as the company’s size and profits increase thanks to the acquisition of Lion Dairy and Drinks in November 2020.

The pandemic has also proven to be extremely disruptive for dairy and infant formula companies listed on the ASX.

Bubs, a2 Milk, Synlait and Fonterra are all on track to end the year below their starting level.

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