ASX ANNOUNCEMENT Bega Cheese Limited ... - Open Briefing

Chief Executive Officer’s Review of Operations and Activities (cont.)
Year Ended 30 June 2011
IPO. The Bega Cheese business segment generated profit after tax of $7.2 million for the year ended 30 June 2011,
compared to $7.3 million in the prior year, being a decrease of $0.1 million or 1%.
Tatura Milk generated total revenue of $308.0 million for the year ended 30 June 2011, being an increase of $37.9
million or 14%. Over the course of the 2010/11 year, Tatura Milk maintained a strong focus on its working capital
management and as a result the business saw its total sales volume increased by 7% on the prior year, which
contributed to a drop in inventories of $21.5 million. Tatura Milk also benefited from an increase in global dairy
commodity prices and a redirection of milk solids to higher sales value/margin products such as cream cheese,
which resulted in an increase in the overall average selling price per metric tonne of 7%.
Tatura Milk generated EBITDA of $23.5 million for the year, compared to $23.1 million in the prior year, being a slight
increase of $0.4 million or 2%. The increase in Tatura Milk’s total revenue was partly offset by an increase in the
average cost of milk paid to farmers and other milk suppliers, consistent with the change in market milk prices.
The Tatura Milk business generated a profit after tax of $15.6 million for the year ended 30 June 2011, compared to
$16.8 million in the prior year, being a decrease of $1.2 million or 7%. The most significant movement in this result
related to taxation whereby Tatura Milk received a tax benefit of $1.8 million in 2011, compared with $4.1 million in
2010. The tax benefit in 2011 arose mainly from co-operative related tax deductions. In 2010, the tax benefit arose
mainly from the recognition of losses incurred in prior years.
The Group continues to invest in the ongoing development of its safety culture, where significant progress has been
made in recent years as a result of the Behavioural Safety Program at Bega Cheese which is now being planned for
roll out to Tatura Milk. The Company monitors its safety performance using the Lost Time Injury Frequency Rate
(LTIFR) and also the safety observation rate (Contact Rate), the latter being a lead indicator. This area continues to
be a major focus for the organisation and now forms part of a critical performance triangle encompassing safety,
quality and environment.
The Company continues to hold shares in two other dairy processors. Bega Cheese has a 25% share of Capitol
Chilled Foods (Australia) Pty Ltd (CCFA) in Canberra which is a regional market milk processor. On 12 November
2010, Bega Cheese acquired a 15% interest in WCB. This investment had a net cost of $22.2 million and was
funded by available debt facilities. As at 30 June 2011 the value of this investment had increased, resulting in a net
fair value adjustment through the Statement of Comprehensive Income of approximately $10.5 million.
When reflecting on the 2010/11 year, it was one of significant change for the Bega Cheese Group. While the major
focus was preparing the business for a successful IPO this work occurred in conjunction with significant capital and
organisational programs being undertaken across the Group. These business changes would not have been
possible without the energy and dedication of the executive and management at both Bega Cheese and Tatura Milk.
I would like to thank the respective teams for the significant contributions to the business performance over the year
and their dedication provided me with a relatively seamless transition in May 2011 from the role of CEO at Tatura
Milk to that of CEO at Bega Cheese. This would not have been possible without the focus and leadership of the
executive groups at each of the respective businesses.
As we look towards the future, the Group, like many other business enterprises, is managing the balance between
the collective potential impacts of currency and global financial volatility versus the beneficial increasing demand for
dairy products as a substantial source of food nutrition, especially in the Asian region. The Bega Cheese Group is
likely to produce approximately 200,000 tonnes of assorted dairy based products including cheddar and mozzarella
cheese, cream cheese, infant nutritional powders as well as general dairy commodities such as milk powders, butter
and whey powders. The Group has a broad product portfolio and a good balance of domestic and international
trade. We believe that the nature of this portfolio together with diversity of our markets positions the Group well for
the coming year.
Aidan Coleman
Chief Executive Officer
27 September 2011
Bega Cheese Limited 2011 Annual Report 4