Bega Cheese boss Barry Irvin is keeping a close eye on struggling rival Murray Goulburn as he casts around for expansion opportunities for his growing and -this year – highly profitable company.
A day after Murray Goulburn reported a $371 million loss and announced it might be a takeover target or at least an asset seller, Bega Cheese on Wednesday delivered an almost five-fold increase in full year profits to $139 million.
The result – inflated by a $124 million gain on the sale of infant formula plants during the year – came on the back of a three per cent lift in revenue to $1.23 billion and the addition of new milk suppliers lured away from Murray Goulburn.
Mr Irvin said the company was very sensitive about speculation around milk supply and the effect that has on the emotional wellbeing of farmers.
However he said Bega was now well supplied and adding capacity to higher margin products such as mozzarella and cream cheese.
“We obviously haven’t been public about how much has come over (from Murray Goulburn) but it’s substantial,” he said.
“I’ll put it this way – it’s in excess of 10 per cent of last year’s supply.”
After signing a landmark deal to buy Vegemite back from US food giant Mondelez in January, Mr Irvin said Bega was looking for new acquisitions and admitted he was watching closely as events unfolded at Murray Goulburn.
“Of course, we’re interested in assets that would enhance the business,” he said, adding that he could see merits in Murray Goulburn assets.
“Just as there were merits in us buying the Mondelez grocery business and bringing Vegemite back home.”
Mr Irvin said the company is now well positioned to respond to any corporate opportunity in dairy or food.
Bega’s sale to infant formula manufacturer Mead Johnson of a powder dryer and a factory helped eclipse 2016’s $28.8 million profit and fund the $450 million Mondelez purchase.
In June Bega announced a $160 million capital raising to fund new expansion opportunities.
Mr Irvin said the Mondelez deal would help make 2017 one of the most important in Bega’s history, saying the year would be remembered as one in which the company built its strength in dairy and moved towards creating “a great Australian food company”.
He was more modest on the ambitions for Vegemite, however.
“I have been asked whether our plan is to take Vegemite to the world; if we could convince the world to want it, of course the answer would be yes – but we’re not naive about the individual tastes of products such as Vegemite,” Mr Irvin said.
Bega shares closed one cent lower at $6.48.
NEW MILK SUPPLIES TOP UP BEGA’S BUMPER YEAR
* Net profit $138.7m v $28.8m
* Sales revenue up 2.6pct to $1.23b
* Final dividend unchanged at 5.0 cents, fully franked