September 24th 2024.
The South Australian dairy company, Beston Global Food Company, has recently made the difficult decision to enter into voluntary administration. This comes after a potential takeover offer from a Japanese company fell through, leaving the company in a precarious financial situation. Despite recording a strong revenue of $170 million in the last financial year, the dairy has been struggling with a combination of factors, including the ongoing effects of the pandemic, high interest rates, and uncompetitive milk prices.
In a statement, the company expressed the challenges it has faced over the past year, stating that rising operating costs, particularly in energy prices, have put a strain on their finances. Additionally, the introduction of the Australian Dairy Code legislation in 2019 has resulted in farmgate milk prices remaining high, which has disconnected them from global market prices for dairy commodities. This has further added to the company's financial burden, with an additional $28 million in costs incurred in the last financial year alone.
Unfortunately, these cost pressures have continued into the current financial year, putting a strain on the company's profits and cash flow. As a result, Beston has made the difficult decision to appoint KPMG as voluntary administrators in order to assess their options and find a way forward. This decision was made after the Japanese company, Megmilk Snow Brands, withdrew their offer to take over Beston's dairy factory in Jervois, South Australia.
Despite extensive due diligence by Megmilk Snow Brands, which included visits to Beston's factories, farmers, customers, and bankers, the two parties were unable to reach an agreement that was acceptable to all involved. This led to the decision to enter into voluntary administration. The company's directors have stated that this was not an easy decision, but it was necessary given the circumstances.
The administrators from KPMG have stated their intention to continue running Beston while they assess the business and explore potential sale and restructuring options. Beston currently employs nearly 300 staff and produces popular dairy brands, including Edwards Crossing and Mables, as well as exporting their products overseas. They pride themselves on being the seventh-largest dairy company in Australia and the largest outside of multinational brands. Despite the challenges they are facing, the company remains hopeful for the future and is committed to finding a way forward.
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