Bega Earnings: Faster Turnaround in Bulk Profitability

We lift our fair value estimate for shares in Bega by 5% to AUD 4.40 per share, mostly due to the time value of money and a quicker return to profitability for the bulk business. Fiscal 2024 underlying EBITDA lifted 2% to AUD 164 million—about 3% below our forecast. The branded business continues to perform strongly, with top-line growth of about 6% and EBITDA margin expansion. This was offset by losses in the bulk business, which processes commodity milk. There has been a disconnect between global dairy commodity prices, into which the bulk business sells, and the Australian farmgate milk prices Bega pays. While commodity prices have been falling since late-2022, Australian milk prices have been elevated.