Here's why Bega Cheese Ltd tumbled today

Bega Cheese Ltd (ASX:BGA) has heavily underperformed the broader market today.

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Shares of dairy group Bega Cheese Ltd (ASX: BGA) fell by as much as 6.7% on Wednesday after it reported a 68% decline in half-year net profit ($6.05 million), despite an 8% increase in revenue from ordinary activities (to $552.5 million). The stock recovered marginally to be trading 3.6% lower for the session, compared to a 0.9% rise for the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).

So What: The company's earnings were impacted by a plunge in dairy commodity prices and higher milk costs. Bega Cheese said that global commodity prices fell by approximately 50%, which impacted its Tatura Milk Industries business while it could not fully pass on higher costs to consumers.

Meanwhile, one-off costs related to Bega Cheese's milk sustainability and growth program also impacted overall returns. The amounts expensed under this program during the half amounted to $10.6 million. Removing the impact of this expense, the adjusted profit after tax would have been $13.5 million, which is still well below last year's result.

While the company kept its fully-franked interim dividend flat at 4 cents per share, it downgraded its full-year earnings guidance to between $25 and $28 million. It had previously stated its full-year result would be in line with last year's $29.7 million result.

Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned. You can follow Ryan on Twitter @ASXvalueinvest.

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