Sheet1
Formula 2020 Units
Liquidity Ratios
Cu
ent Ratio Cu
ent Assets/Cu
ent Liabilities 2.3 ratio
Quick Ratio (Cu
ent Assets – Inventory – Prepaid Expenses)/ Cu
ent Liabilities 1.1 ratio
Profitability Ratios
Gross Profit Margin Gross Profit/Sales 36 Percent
Net Profit Margin PAT/Sales 6 Percent
Operating Profit Margin EBIT/Sales 12 Percent
Return on Assets PAT/Average Assets 2.73 Percent
Return on Equity PAT/Average Equity 6.12 Percent
Efficiency Ratios
Accounts Receivable Turnover ratio Credit Sales/Average Accounts Receivables 13.62 times
Days Receivables (DR) Average Accounts Receivables/ (Credit Sales/365) 26.8 days
Accounts Payable Turnover Ratio Credit Purchases/Average Accounts Payables 9.06 times
Days Payables (DP) Average Accounts Payables/ (Credit Purchases/365) 40.28 days
Inventory turnover ratio Cost of Goods Sold/Average Inventory 5.47 times
Days Inventory (DI) Average Inventory/ (Cost of Goods Sold/365) 66.7 days
Cash Conversion Cycle DR+DI - DP 53.22 times
Capital Structure Ratios
Debt to Assets Debt / Total Assets 36 Percent
Equity to Assets Equity / Total Assets 65 Percent
Debt to Equity Debt/Equity 55 Percent
Interest coverage ratio EBIT/Interest 4.22 times
Market Performance Ratios
Earnings per share PAT/Number of Shares 0.11 $
Dividend per share Dividend/Number of Shares 0.05 $
Price Earning Multiple Market price of share / EPS NA
BEGA CHEESE LIMITED
2020 Annual Report
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Contents
Performance Highlights 02
Chairman’s Report 04
Chief Executive Officer’s Review 06
Directors’ Report 12
Auditor’s Independence Declaration 36
Corporate Governance Statement 37
Financial Statements 39
Notes to the Financial Statements 44
Directors’ Declaration 88
Independent Auditor’s Report 89
Shareholder Information 95
Corporate Directory 96
A special thanks to the staff, farmers and customers whose images we have used through
the report to illustrate relevant facts of our business. They represent the many people that
together make Bega the Great Australian Food Company it is today.
Performance Highlights
32 ▲
Revenue ($m)
Revenue has increased by $73 million, or 5%, compared to the prior year.1,493 millionFY20
20
1,420 millionFY20
19
International all
usiness units
35%
Bega International
Export sales totalling $523 million, being an increase of 15% on
the prior year, comprised 35% of total sales.
FY2020 Revenue
59%
Branded*
41%
Bulk*
* the Group has two new reporting segments:
i. Branded – the manufacture of bulk ingredients into value added consumer products for internal or external
ands.
ii. Bulk – the manufacture of bulk dairy ingredients, nutritional and bio nutrient products.
BEGA CHEESE LIMITED 2020 | PERFORMANCE HIGHLIGHTS
32 ▲
Financial results
The statutory result for each of FY2020 and FY2019 included a number of non-recu
ing items, which in FY2020 related primarily to legal costs
and in FY2019 related primarily to business acquisitions, impairment of Coburg assets and other corporate activity. On a statutory basis for
FY2020 earnings before interest, tax, depreciation and amortisation (EBITDA) was $87.8 million, profit before tax (PBT) was $31.0 million and profit
after tax (PAT) was $21.3 million. On a normalised basis for FY2020 EBITDA was $103.0 million, down 2%, PBT was $46.2 million, up 3%, and
PAT was $31.9 million, up 3%.
EBITDA ($’000) Basic earnings per share (cents)
Normalised* Statutory
102,992104,867
FY2020FY2019**
78,933
FY2019** FY2020
87,824
Normalised* Statutory
XXXXXXXXXX
FY2020FY2019**
9.9
2.1
FY2019** FY2020
Normalised* Statutory
Profit after tax ($’000) Total dividend per share (cents)
30,929 31,886
FY2020FY2019**
4,447
FY2019** FY2020
21,268
Statutory
10.0
FY2020
11.0
FY2019
Production volume (tonnes)
Production has decreased by 2%, compared to the prior year,
eflecting the impact of drought and supply competition.
Total dividend per share
Bega Cheese Group has declared a final dividend of 5.0 cents per
share, taking the total dividend relating to FY2020 up to 10.0 cents per
share. This represents a total payment of $21.4 million, being 67% of
the normalised profit after tax and a decrease of $2.0 million, or 9%, on
the prior year.
303,252
297,668
*Normalised results exclude the impact of significant events occu
ing during the year.
**Amounts have been restated, see note 32 of the financial statements for details.
FY
20
19
FY
20
20
4 ▲
Chairman’s Report
In the last two decades, it has often been the case that leaders from all
walks of life have talked about a particular year as being tumultuous, a
year of challenge, a year of change, a year of opportunities, a year the
likes of which we have never seen before. While these statements are
with good reason and foundation it is my view that FY2020 has made
many of the preceding 20 years look simple and peaceful by
comparison. At Bega Cheese we have faced highly competitive milk
procurement markets, significant drought impacting our supply base,
substantial increases in input costs across the supply chain, volatility
in our markets and cu
ency, never before experienced fires in Bega
and Gippsland, and this was all prior to the a
ival of COVID-19 and the
disruption it has
ought to our markets, customers, suppliers, staff
and the global community.
It is in the above context that I am proud to report on the sound and
stable business performance of Bega Cheese for FY2020. While it has
een a challenging year on many levels the strength of Bega Cheese’s
strategy, experience and culture has once again been demonstrated
and continues to position us well to manage challenge and change.
It is important that the company acknowledges the misstatement in our
FY2019 accounts which was discovered and co
ected in our 1H FY2020
eport. The misstatement was related to accounting systems changes
associated with our Koroit acquisition and meant that EBITDA was
overstated in the FY2019 year by $10.5 million. The company was very
emba
assed by the e
or in our accounts and has conducted an internal
and external review resulting in structural, personnel and process
changes to ensure this does not happen again. Comparisons in my
eport will be to the co
ected FY2019 EBITDA, EBIT, PBT and PAT.
I am pleased to once again report that Bega Cheese has continued to
grow with total revenues in FY2020 being $1.49 billion, an increase of
5%. While revenues continue to grow, a highly competitive milk supply
environment and market both in Australia and internationally meant
that normalised EBITDA and PAT were relatively stable at $103.0 million
and $31.9 million respectively. Importantly, the company has reduced
net debt significantly with FY2020 net debt being $236.4 million a
eduction of 18%.
The impact of drought and supply competition meant that overall
production decreased by 2% to 298 thousand tonnes. Bega Cheese
has continued to review and integrate its infrastructure to reflect
changes in both our supply profile and the market. Following the
closure of Coburg in FY2019 we have completed the integration of
Koroit, continued to focus Tatura on high value dairy proteins and
nutritionals, commenced consolidation of some of our processed
cheese capacities between our Bega and Strathmerton facilities,
created greater capacity flexibility at our Port Melbourne facilities and
progressed toll manufacturing a
angements with other dairy industry
manufacturers.
The ongoing refinement of our manufacturing infrastructure reflects
oth changes in our supply regions and the market and is a great
demonstration of the agility and experience of the business.
The strategy of having diversified supply regions producing high value
dairy ingredients for both the retail and dairy nutritionals markets
continues to be a priority for the business. An important initiative this
year was the construction and commissioning of our new lactofe
in
infrastructure at Koroit. I am pleased to report that despite the
challenges of COVID-19 the plant was commissioned on time and the
company will receive the full benefit of the new capacity in FY2021.
5▲
BEGA CHEESE LIMITED 2020 | CHAIRMAN’S REPORT
It has been an important year for our Bega Foods business. Sales in
our peanut butter range continue to grow, particularly as a result of the
successful launch of our Simply Nuts products, additionally we
continue to develop our Farmer’s Table cream cheese and butter
anded business, and the promotion of Vegemite has seen a return to
growth, and the iconic status of this much loved
and reinforced.
Bega Foods has successfully expanded in the spread’s category with
the launch of B honey, which combined with our existing range and
new product development gives us significant presence in Australian
etail and food service channels in dairy and spreads. Bega Foods has
continued to grow our international retail and food service business
prior to the onset of COVID-19 where sales have since stabilised.
It is noteworthy that the Bega Foods business was able to quickly
espond to changed market conditions as a result of COVID-19, the
usiness managed a collapse in both the Australian and international
food service markets and a short term surge in demand in retail. The
capability and flexibility of the team to quickly adjust and change in
oth the dairy and food business again confirms value of the diversity
of the business and customers we serve in Australia and internationally.
We were pleased to receive a favourable decision in our legal dispute
with Kraft from the Full Court of the Federal Court of Australia in
April 2020. The Full Court judgement confirmed Bega Cheese’s
ownership of the trade dress cu
ently associated with its peanut butter
product. Kraft has now sought leave to appeal to the High Court. The
High Court has set a date in mid-November 2020 to hear the application
for leave to appeal to the High Court. The dispute with Fonte
a
egarding the Bega
and continues. The trial in the Supreme Court of
Victoria completed in July 2020 and we are now awaiting judgment.
Bega Cheese has grown substantially over the past decade making a
number of acquisitions and managing significant change. As we have
previously reported to the market it was appropriate that this year we
conduct an organisational and process review to ensure that our
usiness has the most effective and competitive structure available to
us. This review has been completed and is being implemented, it does
unfortunately mean that there will be some redundancies within the
usiness, we are always conscious of the dedication and commitment
our staff give and we will of course offer support to those whose jobs
are not required. It is always important to continue to review the
competitiveness of the business and ensure our structure and strategy
are aligned and position us to be the company of choice for suppliers,
staff, customers and shareholders alike.
CEO Paul van Heerwaarden will provide more detail on the performance
of the business and also expand on our actions and the impact of
COVID-19. Paul has led the team wonderfully through a challenging
year and his focus on the safety of all involved with Bega Cheese while
stewarding the business through