Bigger issues dominated the investment mindset on Thursday as the market took a big dive, rendering virtually moot the reactions to earnings reports from Bega and Blackmores.
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Australia’s biggest locally owned food group Bega Cheese (ASX: BGA) posted a major lift in profits for the first half of the financial year, but significant disruptions from the Omicron variant weighed on the bottom line.
The Dairy and grocery products producer announced a 29% jump in net profit to $28 million in the six months to December 26, helped in part by a double-digit increase in demand for its alternative milk brand Vitasoy (which it gained in the Lion acquisition).
Statutory earnings before tax, interest, depreciation and amortisation (EBITDA) were up 47.7% to $97.2 million in the half.
Revenue more than doubled, climbing 113% to $1.51 billion as the company integrated the Lion Dairy brands and operations into its business.
Bega lifted interim dividend by 10% to 5.5 cents a share on capital expanded by the share issues to help finance the Lion acquisition in 2020.
But the company said COVID-related disruptions had cost the business’ bottom line more than $20 million in the half – those costs and associated concerns on supply chain security saw Bega issue a weak trading update in December which in turn saw the shares sold down sharply by worried investors.
Global supply chain issues in the first quarter led to higher prices for material such as fuel, packaging, coffee and resin, while suppliers that didn’t meet their delivery times created higher operational costs for the company.
Then the Omicron wave hit in the second quarter saw local supply chains upended and “significant absenteeism” across Bega’s workforce, which also led to “large cost increases”.
Lockdowns also meant that cafes and restaurants were shut or saw lower levels of foot traffic. Bega also had to shoulder direct costs for items such as rapid antigen tests, personal protective equipment deep cleaning.
Among Bega’s broad portfolio, its plant-based milk category (consisting of the singular brand of Vitasoy) grew the most, at 12% to $390 million (ironic given the importance of dairy products to the company such as milk, cheeses and yoghurts.
And demand for water ice products, such as Zooper Doopers and Berri, slid backwards by 10.3 per cent (understandable given the mild spring and summer across much of the East Coast thanks to the prevailing wet La Nina weather pattern.
Looking ahead, the company says it will be focused on projects across its yoghurt, nutritionals and white milk categories and on improving supply chain efficiencies.
“Priorities for the business in the short term are strongly focused on managing the impacts of COVID-19 in the third quarter and being well-positioned for an expected recovery in the fourth quarter and beyond,” Bega Cheese said in a statement.
Bega shares fell more than 7% to $4.90 yesterday as it and so many other companies, were hit by the selloff triggered by the Putin assaults on Ukraine which worsened during the day. The wider market was down 2.99%, so yesterday’s price moves were mostly irrelevant in terms of an assessment of the results.
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The same comment can be made about the treatment of Blackmores (ASX: BKL) shares yesterday.
They fell sharply yesterday lower despite the vitamin maker reporting a profit jump for the first half.
The fall of more than 9% to $84.18 though was not a guide to the way the market viewed the results. Most of the slump was due to President Putin’s aggression and the nervousness of investors everywhere.
Blackmores had told the market that revenues were up 14.3% in the December half to $346 million for the half, while net profit was up 44% to $20.3 million.
Revenues for domestic sales of vitamins were up 1.2%, which is a sign the company’s big loss in sales over the past two years are stabilising.
Like A2 Milk and several other companies that had used the Chinese traveller or daigou channel to sell products into China, Blackmores has had a tough two years thanks to the pandemic forcing borders to remain shut after they were initially closed in 2020.
The company said its growing international division posted a strong performance, particularly in Indonesia where revenues more than doubled in the half in local currency terms.
Blackmores management warned that these tailwinds are likely to stop in the second half, however, while logistics and supply chain challenges may continue.
“Market conditions remain challenging in ANZ due to COVID-19 impacts such as supply chain disruption, out of stocks, and changing shopper behaviour,” the company said in commentary on the numbers.
The company will pay shareholders a 63 cents per share interim compared to 29 cents a year ago.
