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Bega Group to sell Vegemite facility, warns of rising milk prices
FoodBev Media

FoodBev Media

30 June 2023

Bega Group to sell Vegemite facility, warns of rising milk prices

Australian food company Bega Group has announced the sale of its Vegemite Way facility in Port Melbourne for AUD 114.6 million (approx. $75.83 million). After undergoing a 13-month sales process, Bega will sell the factory to local property fund managers, Charter Hall, for an initial term of 15 years, with two additional five-year options. According to the company, Bega plans to keep producing brands such as Vegemite and Bega Peanut Butter at the site. The funds from the sale will be used to reduce debt and bolster Bega's strategic initiatives, as well as to "transition to a company focused on market-leading brands". In a statement, Bega highlighted that the deal would strengthen its balance sheet and enable the “acceleration of an organisational restructure and business simplification programme”. It said the restructure, as part of the programme, will enhance the efficiency and effectiveness of its branded business and reduce costs in its bulk commodity business. The programme is expected to have a cash cost of approximately AUD 21 million (approx. 13.89 million) and create annual savings of an equivalent amount. In addition, Bega has issued a warning stating that the rising costs of dairy may lead to a non-cash impairment of between AUD 180 million (approx. $119.11 million) to AUD 280 million (approx. $185.28 million)

The cheese manufacturer said that due to the ongoing decrease in Australian milk production, with a drop of over 700 million litres in the past two years (about a 9% decrease), and limited capacity, it "expects the intense competition for raw milk to continue beyond this year". Bega stated: "The precise impairment amount will be impacted by the finalisation of milk procurement and farm gate milk pricing programme for FY 2024. Our current anticipated non-cash impairment is in the range of AUD 180 million to AUD 280 million. We would expect to conclude the calculation as we finalise our audited result for FY 2023 and will update the market when we have more clarity.”

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