That Australia has a naturally abundant supply of water, food and such is no mystery. Now imagine turning those on their heels, creating artificial iterations, and expecting everyone to shell out big bucks, especially at a time when even the natural abundance is near impossible to afford. Perhaps not the most ideal picture.
Yes, people are becoming more mindful when it comes to their diets, casting around for sustainable food options and the like. However, with the ongoing inflationary environment putting pressure on people’s wallets, people would much rather save than spend on fake meat and improved water.
That’s why Aussie dairy company Beston Global Food Company (ASX: BFC) has expressed its intent to discontinue and divest its subsidiary Provincial Food Group (PFG)’s meat and plant-based meats business, its Aqua-Essence water assets and business and its Technology business.
Due to the significant increase in inflationary pressures in Australia, particularly affecting energy prices, insurance costs, and interest rates, Beston has decided to change its strategy. Instead of focusing on growing its range of food and beverage products, the Company will now prioritise profitability by concentrating on its Dairy and Dairy nutraceuticals business, which offers high-value products.
The Chief Executive of BFC, Mr Fabrizio Jorge, said, “ The decision of the Board and Management to discontinue and divest our PFG, Aqua-Essence and Technology businesses is not something that we have taken lightly, but reflects the direct recognition of a need to play to our strengths as a value-add Dairy processing and Nutrition business in addressing the challenges presented by the inflationary environment now prevailing in Australia, as well as the ever growing expectations of the markets, channels and customers we service.”
As part of this shift, Beston plans to stop its meat and plant-based meat processing operations in Shepparton, Victoria, as well as its water bottling production assets, land, and water licences in Mt Gambier, South Australia. The Company will also discontinue its Beston Technology business. By making these changes, Beston will be able to dedicate all its resources and efforts to its Dairy and Dairy Nutrition business, where it has developed exceptional capabilities and capacity.
The Company claimed that it is the largest dairy processor in South Australia, responsible for more than 30% of the state’s total milk production and making annual milk payments exceeding $100 million to dairy farmers. By shifting its focus towards becoming “Australia’s leading sustainable and value-added dairy company” through the discontinuation and divestment of its meat, water, and technologies businesses, it aims to concentrate on its most profitable and significant business segment. This strategic move will also help BFC better navigate the cost and price pressures that affect the Company, as well as other companies within its supply chain.
In terms of financial performance, BFC’s dairy business alone is projected to achieve sales surpassing $170 million and a Trading EBITDA(a) of approximately $5 million in FY23.
However, its overall financial performance is not so rosy. Beston recently issued a downgraded EBITDA guidance for FY23, pointing not only to its other food segments but also an expected decline in milk intake come Q4 FY23. It lowered its EBITDA guidance significantly from the original $8 to $10 million to a mere $0 to $2 million.
Beston is currently in the process of selecting suitable advisors to assist with the divestment of its businesses and assets. The funds generated from these divestments will be utilised to reduce the Company’s debt.
Alinda is a Business Reporter for The Sentiment
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