Bega Cheese shareholders are beginning the new year on a high with a stock market Christmas present.
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On Monday afternoon the company’s share price sat at $7.53 after hitting a peak of $8.13 on December 31 last year – a 9.3 per cent gain for the last full day of trading in 2015.
After suffering from weak dairy and milk powder prices throughout most of 2014 and 2015 due to oversupply issues, things appear to be changing quickly for the company.
With the stock price rising more than $2 a share since mid-December, many local shareholders will be seeing the benefits of the company’s announcement in late-October of an instant formula deal with vitamins and supplements manufacturer Blackmores.
The joint-venture, equal partnership deal will no doubt also capitalise on surging demand for high-quality infant formula in China due to the ending of the nation’s one-child family policy.
“The Blackmores venture has been very well received,” Bega Cheese executive chairman Barry Irvin said on Monday.
While Bega’s share price remained fairly static for most of 2015, Mr Irvin hinted the recent steep rise is due to the shared branding deal announced in October.
He said that while no official announcement has been made by the company as yet, “food stocks are all performing well” and “things like the changes to the one child policy will see it continue”.
The former dairy farmer said the company is now sitting on market capital of a billion dollars, which will now allow for moves to manufacture more sophisticated products.
A further six-year supply deal with Tasmanian company Bellamy’s Organic is also likely to maintain strong revenue streams.
It brings an end to what was a mixed year that saw the group announce further manufacturing investments, and the selling of a nine per cent stake by its largest investor and the world’s largest milk processor, New Zealand company Fonterra late in the year. With increased demand for health supplement products in Asia combining with the view that Australian products are “clean and green”, the possibility is open for further spikes in profits over the next year.
“The reputation of Australia as a good place for agriculture and our strict quality controls will guarantee it continues,” Mr Irvin said.
