Investor Presentaiton
Specific Bega Investment Risks
Milk and other key ingredient supply and pricing
Bega relies on milk supply from its farmer suppliers. In turn, the farmer suppliers need suitable climatic conditions in order to produce pasture and source grain and hay/fibre to feed their dairy herds.
Farmer suppliers are not generally under long term supply contracts, and milk prices are usually set and communicated to farmer suppliers on an annual basis. Farmer suppliers are generally free to supply alternative
buyers if they so wish. The price paid to farmer suppliers for their milk is a key factor in being able to attract and retain supply. Milk prices paid are a function of the returns that Bega can achieve for its dairy products.
If Bega cannot achieve a return that enables it to be competitive there is the potential to lose some supply of milk from farmer suppliers.
Besides milk, other key ingredients, including peanuts, are used by Bega. An inability to access the necessary volumes of such key ingredients on favourable commercial terms may result in reduced output of its
products.
Certain costs of doing business are outside Bega's control. For example Bega's cost of doing business is impacted by the farmgate milk prices which are a major component of its dairy products and global peanut
prices and sourcing which are a major component of its peanut butter products.
COVID-19 risk
Due to the COVID-19 global pandemic, Bega has been designated a 'permitted business', with no restrictions and under a COVID-19 Safe Plan. It has been able to continue operating throughout the pandemic period
and during the Stage 4 Victorian lockdown. However, there are a number of additional risks faced by Bega and its businesses. These include the risk of:
1.
2.
Retail partners of Bega being unable to operate due to lockdown or mandatory quarantine, impacting sales;
Bega or its manufacturing partners being unable to operate their factories due to lockdown or mandatory quarantine, impacting supply of products;
3. Bega and its supply chains being interrupted due to lockdown or mandatory quarantine, impacting supply of products;
4.
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Bega not being able to effectively manage its workforce during any periods of lockdown or mandatory quarantine, impacting on its ability to execute on its business strategy;
Customers of Bega ceasing to operate and Bega not being able to collect outstanding receivables or customers materially adjusting trading terms, impacting Bega's net revenue; and
A general downturn in the global economy due to the COVID-19 pandemic causing consumers to reduce discretionary purchases, impacting on the overall sales of Bega.
Investors should be aware that the COVID-19 global pandemic and related actions taken in response by the Australian Federal and State governments and foreign governments continues to evolve and with ongoing
uncertainty, and there could be negative impacts on Bega's business (whether specific to Bega or general) that are beyond Bega's control
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