Bega Cheese milks profits for shareholders, hits all-time high

Bega Cheese (ASX: BGA) has released its full year results, which has led to the company’s share price rallying to an all-time high of $3.09. The full-year results were impressive showing that:

  • Revenues grew 8.3% to $1 billion
  • Net profit after tax grew 24.6% to $25.4 million
  • Earnings per share grew 30.8% to 16.76 cents per share
  • Dividends grew 15% to 7.5 cents per share

Management strengthened the balance sheet, reducing net debt by around $20 million to $87 million. Management also held capital expenditure relatively flat while boosting production volumes from 203,765 tonnes to 210,052 tonnes.

Bega’s performance reflects the dairy industry’s generally strong performance, which is also being reflected across much of Bega’s peer group, albeit to differing degrees.

Fonterra (ASX: FSF) achieved record GlobalDairyTrade (GDT) sales in August. It was the highest-ever monthly revenue for Fonterra through GDT, with the New Zealand-based firm selling 109,664 tonnes valued at NZ$685 million. Volume was up 27% on the previous year while revenue shot up 107%.

Warrnambool Cheese & Butter Factory (ASX: WCB) meanwhile has benefited from the improving market conditions but not enough to offset some significant headwinds. In April, Warrnambool was forecasting an 80% fall in profits due to “subdued international commodity prices, the continuing high Australian dollar and ongoing competition for milk.”

However, improving trading conditions which have resulted in international dairy prices rising to record levels in recent months, coupled with the declining Australian dollar have led the company to upgrade its forecast to a 52% decline in profits for the 2013 financial year.

Foolish takeaway

Rising standards of living in China and elsewhere throughout the region and leading to growing demands from Asia for nutritional foods. The rising demand has the potential to be a bonanza for Australian farmers and food processors with domestic dairy producers well placed to capture export market share into this growing region.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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