The Bega Cheese Ltd (ASX: BGA) share price is dropping following the release of the company's half-year earnings. Bega revealed a large increase in company revenue and a 10% boost to the interim dividend as a result.
So, why has the Bega share price dropped 7.75% to $4.88 (at the time of writing)? Let's dive in…
What did Bega Cheese report?
For the first half of the 2022 financial year (ending 26 December 2021), Bega Cheese reported the following financials:
- Revenue up 113% to $1.5 billion against the prior corresponding period (pcp)
- Earnings before interest, taxes, depreciation and amortisation (EBITDA) up 48% to $97.2 million
- Profit after tax up 29% at $28 million
- Earnings per share (EPS) down 3% at 9.3 cents per share.
Bega Cheese is continuing to reap the benefits from its Lion Dairy & Drinks acquisition announced back in November 2020. This accounted for $787 million of revenue for the half, with the integration of the business progressing well.
What else did Bega tell the market?
COVID-19 remained a challenge for Bega Cheese throughout the first half, creating a financial impact of $20 million.
It wasn't only the workforce affected but supply chains, too. In a statement, Bega said this impacted "prices for direct and indirect internationally sourced materials such as fuel, packaging, resin and coffee".
"Many suppliers of these products were unable to meet delivery windows creating interrupting to manufacturing schedules resulting in increased operational costs," it said.
Net debt increased by $3.7 million (against the previous half ending 30 June 2021) to a total of $328.6 million.
The company declared a fully-franked dividend today of 5.5 cents per share to be paid on 24 March. This is a 10% increase on the FY21 interim dividend of 5 cents and represents a distribution of $16.7 million.
Bega said the boosted dividend "reflects the growth in total earnings…which has strengthened following the acquisition of Bega Dairy and Drinks".
Why is the Bega share price falling when profits are up?
The broader market sell-off today might be part of the reason why the Bega share price has fallen despite the company reporting increased profits. The S&P/ASX 200 Index (ASX: XJO) is down 2.5% at the time of writing.
Looking forward, Bega is focused on managing COVID-19 challenges. It also intends to further capitalise on the opportunities created through its acquisition of Lion Dairy & Drinks.
It also has more products to focus on in the next financial year, including "yoghurt, nutritionals and white milk".
Bega Cheese share price snapshot
Over the past 12 months, the Bega share price has dropped by 20%. It sunk to a 52-week low of $4.84 on 23 December following a performance update for FY22.
A week later, the share price jumped when Andrew Forrest bought a 6.61% interest in Bega for $108 million.
The company has a market capitalisation of $1.6 billion.
