Australian food business Bega Group has warned it could be facing a non-cash impairment of between AUD180m ($119.0m) and AUD280m.
The cheese-to-spreads manufacturer said the situation has been caused by falling milk production volumes and rising dairy ingredient prices.
Bega said Australian milk production had decreased by 700m litres, or 9%, over the past two years and the limited capacity had resulted in intense competition for raw milk. Labour shortages have been partly blamed for what Bega described as a “continued decline”.
In an announcement on the Australian Securities Exchange (ASX), the Vegemite and Bega Peanut Butter brands owner said: “The precise impairment amount will be impacted by the finalisation of milk procurement and [the] farm gate milk pricing programme for FY2024. Our current anticipated non-cash impairment is in the range of AUD180m to AUD280m. We would expect to conclude the calculation as we finalise our audited result for FY2023 and will update the market when we have more clarity.”
Bega suggested the non-cash impairment would not compromise its financial strength.
In its ASX announcement, Bega also disclosed it had raised AUD114.6m through the sale and leaseback arrangement of its Vegemite factory in Port Melbourne with property group Charter Hall.
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It said the deal would strengthen its balance sheet and enable the “acceleration of an organisation restructure and business simplification programme”.
The company also confirmed in the statement its previously announced EBITDA guidance for FY2023 as being in the lower range of AUD160m to AUD190m.
In March, Bega announced the launch of plant-based alt-cheese products, just two months after it sold its stake in a Hong Kong-based dairy-free beverages enterprise to joint venture partner Vitasoy.
In February, it announced it was closing its Canberra dairy facility and moving production to another site.