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Almost $6 million loss for Maggie Beer as milk business sours

A nearly $5 million impairment on Maggie Beer Holdings’ Paris Creek Farms dairy business crushed the company’s profits, leading to an almost $6 million loss in the first half.

Feb 22, 2024, updated Feb 22, 2024
Maggie Beer Holdings will contract a third party to make cheese products for the brand. Photo: Maggie Beer.

Maggie Beer Holdings will contract a third party to make cheese products for the brand. Photo: Maggie Beer.

Sales in the consumable goods business’ Maggie Beer Products (MBP) and Hampers and Gifts Australia (HGA) divisions rose in the first half, but a 12 per cent decline in sales plus a multi-million dollar impairment from its dairy business Paris Creek Farms (PCF) dragged overall profits down.

The Adelaide-based company today announced a statutory loss of $5.7 million, which includes a $4.6 million non-cash impairment in PCF.

The company – one of the largest in Adelaide according to InDaily‘s South Australian Business Index – said the trading results in PCF “reflect the decline in bulk milk sales”, and to optimise costs will be contracting a third party to make Maggie Beer-branded cheese.

“The company remains focused on optimising its assets,” MBH said.

“In executing this strategy, the company has identified a cost efficient opportunity to leverage a large scale, quality manufacturer to supply Maggie Beer cheese.

“MBH is well advanced in securing this third party supply and as a result, the planned capital expenditure for the facility’s cheese operation has been placed on hold.”

Overall net sales were up 0.9 per cent to $58.9 million in the half year ended 31 December, buoyed by “strong recovery across online sales” which rose by 6.8 per cent in the second quarter. Online sales now account for 62.1 per cent of MBH’s total revenue.

MBP saw sales growth of 7.4 per cent in the second quarter driven by the brand expanding its offering in cooking supplies – namely stocks, broths and finishing sauces stocked at Coles. The brand, named after South Australian celebrity chef Maggie Beer, also launched ice cream into Woolworths which helped sales rise.

HGA sales grew by 7.9 per cent during the “peak Q2 selling period” around Christmas.

PCF was the only division to see sales go backwards – down 12 per cent in the half.

The company said it was in a “strong financial position” at the end of the half year, putting it in a position to invest in future growth.

“MBH retains a strong balance sheet with total net assets of $80.2 million and a net cash position of $11.6 million at 31 December 2023 with no debt,” MBH said.

“The group’s strong financial position enables the business to respond to the current market challenges while maintaining investments in growth initiatives to build further scale and capability and optimise the company’s asset base.”

MBH expects to achieve positive sales growth in the second half.

CEO Kinda Grange said that “while overall market conditions remain challenging, we were pleased to deliver a strong recovery in sales growth in the second quarter (compared to the pcp)”.

“This growth demonstrates positive market traction from the execution of our strategic initiatives across both online and retail channels,” she said.

“In response to the continuing market challenges, we are accelerating strategic initiatives in the second half and delivering operational initiatives to recover cost inflation and generate efficiencies across manufacturing.”

Shares in MBH are down 4.55 per cent in early trade this morning.

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