Bega (BGA) flags drought issues at AGM

Stock

Bega Cheese (BGA) $3.96 as at 28/10/2019

Event

As AGM season ramps up, so do the downgrades. It was Bega’s turn today with the company noting the drought had continued to have a negative impact on earnings into FY20 after it had significantly impacted the FY19 result 2 months ago.

As the drought rolls on, farmers are seeing milk volumes slide driving prices higher as competition for product increases. The trend was identified at the full year result however Bega said it has occurred “at a faster and deeper rate.” This has caused Bega to guide EBITDA to $95m-$105m, down 13% from last year and a 14% miss to expectations.

Coming in from the other side, Bega has also seen demand soften in a number of export markets as the trade war bites. The company has moved to review their supply chains and cost structures in an attempt to reduce the impact of this in the medium term however earnings will be hit in the current year.

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