The Bega Cheese Ltd (ASX: BGA) share price has soared higher in early morning trade following the release of the company's results for the financial year ended 30 June 2020 (FY20).
The Bega share price reached as high as $5.30, before pulling back to (at the time of writing) $5.16, up 6.1%.
Let's take a look at Bega's results.
How did Bega perform in FY20?
Bega reported solid FY20 results with continued growth and significant cash generation.
For the full year ending 30 June, Bega announced a revenue increase of $1.5 billion, up 5% over FY19. This was underpinned by strong sales in its international grocery market which grew by 15.1%.
Earnings before interest, tax, depreciation and amortisation (EBITDA) came in at $103 million, down almost 2% from $104.8 million.
Net profit after tax stood at $31.8 million, a small increase of 3% compared to $30.9 million the year before.
Earnings per share remained unchanged at 9.9 cents.
Bega revealed an operating cash flow of $137.7 million from its activities, driven largely by customer receipts. This was a jump from $100.3 million in FY19.
The company also managed to reduce its net debt position by $52 million to $236.4 million.
The food company declared a fully franked dividend of 5 cents per share to be paid to shareholders on 7 October.
This takes the total dividends for FY20 to 10 cents per share. Although this is less than the 11 cents per share declared in FY19, Bega is taking a cautious approach to maintain cash management and debt reduction post-COVID-19.
COVID-19 impact
Bega advised that the pandemic is expected to impact its customers and supply chain well into FY21 and possibly longer.
The business has been regularly reviewing its continuity plans to ensure it is able to meet the strong domestic demand for its products, as well as managing and redirecting production destined for export markets.
Management commentary
Executive chair of Bega Cheese Barry Irvin commented:
It has been a year like no other, we began the year in the grips of drought which contributed to a very competitive milk procurement environment and then managed never before seen bushfires. While still managing the impacts of those difficult circumstances COVID-19 was upon us, resulting in a major correction in global dairy commodity prices, a collapse in Australian and international food service demand and an increase in Australian retail demand.
Further to Barry Irvin's address to the market, CEO Paul van Heerwaarden said:
It has been important to ensure we remain focused on both managing the challenges of the current year and in addition we continue to build the business for future success. The strong cash generation and associated debt reduction combined with a successful process improvement program positions us well. We have continued to invest in new products, markets, technology, infrastructure and our people all of which will contribute to the success of the business in future years.
FY21 outlook
Bega did not provide any guidance in respect to forecasted earnings. However, the company expects improved seasonal conditions going into FY21 as it continues to manage COVID-19 disruptions across its supply chain.
Management is determined to review processes to further reduce working capital and net debt to strengthen its balance sheet. Furthermore, Bega advised it will be focusing on investing in its product range and branded foods portfolio to expand sales opportunities.
With the completion of its new lactoferrin plant at Koriot in Victoria, the execution of the organisational review in 1H FY21, and the optimisation planned for its secondary processing plants, the company advised it is well positioned for future EBITDA growth.
About the Bega share price
The Bega share price has made a strong comeback of 46.5% since falling to as low as $3.52 in March. For the calendar year to date, the Bega share price is up 19.4%, but down almost 7% from its 52-week high at the time of writing.
