2. Table of contents
Contents Slide number
Executive summary 3
Introduction 4
Purpose of analysis 5
Description of company and industry background 6
Analysis of financial report data
• Profitability ratios
• Efficiency ratios
• Liquidity ratios
• Gearing ratios
7
Assessment of other relevant information 13
Conclusion 14
Appendice
• Profitability ratios
• Efficiency ratios
• Liquidity ratios
• Gearing ratios
15
References 25
3. Executive summary
The company analysis report of Bega Cheese Ltd. (BGA) firstly provides
the introduction and purpose of the analysis followed by a description
of company and industry background. A thorough review of the
financial report data is made for the three years starting from 2020
upto 2022. After that, an assessment of other relevant information
such as the social and environmental factors is made. This part includes
a look at significant events of the company not forming a part its day-
to-day routine. Finally, the result of the company analysis is stated in
conclusion at the end of the report.
4. Introduction
Bega Cheese Limited is Australia’s leading processor, manufacturer and
distributor of dairy and associated products. It caters to both the
Australian and the international markets with an array of products that
include natural cheese, processed cheese, butter, cream cheese,
packages cheese, powders and nutritionals. It has five production
facilities and operates under a co-operative structure. Its two primary
business segments are Bega Cheese and Tatura Milk. A strategic
alliance with Mead Johnson and the sale of infant nutritional assets to
the company has been its principal corporate activity recently. The
analysis of the company is made to assess its profitability, liquidity,
efficiency, gearing and cash flows.
5. Purpose of analysis
The primary purpose of preparing the company analysis report for Bega
Cheese Ltd. is to analyze the company's profitability. It is also to see
whether the company has enough liquidity to pay off its debtors in
time. The other purpose of the analysis is to assess the efficiency of the
management of the company in running the business and achieving the
stated objectives; to see whether the assets of the company are being
utilized optimally and whether the shareholders can earn adequate
returns on their investments. Also, how much debt the firm employs to
purchase its assets and whether it can justify the same through the
profits made by it.
6. Company and industry background
The company was established in 1899 and was officially opened as a ‘butter factory’ in 1900,which
was later changed to ‘Bega Co-operative Society Ltd.’ in 1944. The company obtained 70% stake in
the dairy company based in Victoria named Tatura Milk Industries in the year 2007. In 2008, the
company changed its structure from being co-operative and became an unlisted public company
‘Bega Cheese Ltd.' In 2011 the company was listed on the Australian Securities Exchange, and it also
gained the remaining 30% stakes of the Tatura Milk Industries. Currently, the firm amasses more
significant percentage of the international Mondelez business in Australia and New Zealand. Bega
Cheese Ltd., a Food Products company comes from the Industry Group Food, Beverages & Tobacco.
It operates in the Consumer Staples sector.It is a crucial player in the Australian dairy industry,
which has had a tumultuous year due to a price decline and a massive increase in the global dairy
production and a significant reduction in milk prices made by the critical competitor and largest
milk processor Murray Goulburn.The other main competitors are Fonterra Co-op Group, Lion
Nathan National Foods and Warrnambool Cheese and Butter among others. The other factors
causing the challenges in the industry are the fluctuating Australian Dollar, variability in the local
milk production and changing consumer preferences.
7. Analysis of financial report data
BEGA CHEESE LIMITED FINANCIAL ANALYSIS
Particulars 2022 2021 2020
Profitability ratios 8.99% 3.96% 22.92%
Australian dairy industry average -1.6% 4.1% 8.1
Return on assets 7.01% 2.99% 17.05%
Australian dairy industry average 1.2% 5.0% 7.4%
Net profit margin 3.37% 1.48% 8.75%
Efficiency ratio
Inventory turnover ratio(in days) 67.78 69.75 66.62
Settlement period for accounts receivable 40.16 37.10 39.86
Settlement period for accounts payable 51.78 57.07 57.60
Assets turnover(days) 173.82 180.60 187.36
8. Liquidity ratio
Current ratio 1.65 1.83 1.52
Quick asset ratio 0.74 0.75 0.65
Cash flow from operations 0.30 -0.09 0.21
Gearing
Gearing ratio 13.14 16.20 6.56
Debt to total assets 44.12 43.40 42.70
9. Profitability ratio
• Profitability ratios are financial metrics that measure a company's financial health and its ability to generate earning
• Return on shareholders’ equity (ROE) ratio measures the profitability of shareholders‘ investments. Bega’s ROE drops from
22.92% in 2020 to 3.96% in 2021 which could be result of decrease in income and increase in overall expenses, hence
profits available to shareholders, in the year 2021. The ROE recovers in 2022 to almost 9% when Bega’s revenue increased
at 7.45%
• Return on assets (ROA) measures the efficiency of the company in turning its assets to generate net income. The higher
the percentage, the more efficient the company is in converting its assets to generate profits.The investment on additional
assets in hope to increase profits faltered as their ROA declined from 17.05% in 2020 to around 3% in 2021. Net profit
before tax doubled in 2022 resulted in the ROA to recover to 7.01%
• In comparison with Australian dairy industry average, Bega has performed extremely well in year 2020 with an impressive
22.92% ROE and 17.05% ROA as compared to industry average of 8.10% and 7.4% respectively. Whilst 2021 has been a
poor year for Bega, with both ROE and ROA lower than industry average, they managed to recover in year 2022 when
most of its competitors experience lower ROE and ROA. Net profit margin calculates the percentage of profit a company
produces from its total revenue. Bega’s net profit margin, dropped almost 80% from 8.75% to 1.48% in 2021 due to
increase in expenses. But it has staged a recovery in 2022 to 3.37% attributed to increase in revenue
10. Efficiency ratios
Efficiency ratios access the company effectiveness in managing its assets.
Among efficiency ratios, inventory turnover indicates a minor increase from
66.62 days in 2020 to 67.79 days in 2022, which means the company, is not
able to move its inventory fast enough. Accounts receivable ratio has also
increased slightly from 39.86 days in 2020 to 40.16 days in 2022. It shows
that the company is taking more time to recover its dues than before, which
may be the results of seasonality or some large but slow payers as well. On
the other hand, Bega seems to pay off its creditors more quickly than before
which means it may be unable to negotiate better terms with them dropping
from 57.6 days in 2020 to 51.78 days in 2022 . Bega’s asset turnover appears
to have been improving over the three years from 187.36 days in 2020 to
173.82 days in 2022, as it can generate more sales in lesser time than before.
This improvement means they are utilizing their assets well
11. Liquidity ratios
Liquidity ratios answers questions like whether the firm would have trouble
paying off what it owes others within the coming year. Company’s
liquidity position is comfortable with the current ratio moving from 1.52
times in 2020 to 1.65 times in 2022. Quick ratio shows a rise from 0.65 to
0.74 in the same period.
This increase means that the company enjoys a sound liquidity position and
can pay off its short-term liabilities with ease. Its cash flow from operations
also improved from 0.21 times in 2020 to 0.30 times in 2022 which indicates
that the company has pulled itself from the temporary negative cash flow of
-0.09 in 2021 and are now in a more favourable cash flow position
12. Gearing ratios
Gearing ratio is used to analyze a firm’s bankruptcy risk and capital.
Gearing ratio has moved from 6.56% in 2020 to 13.14% in
2022.Similarly, the debt to asset ratio has jumped from 42.70% in 2020
to 44.12% in 2022. This climb shows that the company is using more
and more debt to fund its operations. This rise could be a good move
for the equity shareholders, as their returns would increase. However,
it exposes the company to more risk with the increased interest
payment burden.
13. Assessment of other relevant information
According to the Chairman of the company Barry Irwin and its CEO Aidan Coleman, environmental risk has the potential to impact
all areas of its business like the suppliers, customers and the communities due to which it has come out with a sustainability report
for the company. This report shows that the company successfully reduced its consumption of energy by 7% and recycled 61% of
its FY 2021 solid waste. Its social impact was that it had 22% women in managerial roles throughout the year. It also reduced the
lost time due to injuries by 11%. Bega Cheese formed a long-term strategic alliance with Mead Johnson (MJN Alliance) on 24th April
2017. It also completed the sale of its spray dryers in Tatura and the infant formula finishing plant at Derrimut to Mead Johnson
Nutrition (Australia) Pty for which it received A$180m. These funds reduced its need for bank funding for the acquisition of
Mondelez’s Australian and New Zealand groceries business including Vegemite. This activity was not part of its day-to-day
operation and had a significant impact on all the three financial statements. It impacted the revenue statement as the revenues from
Bega Cheese, and Tatura milk doubled from A$406m and A$232m to A$808m and A$468m respectively. Balance Sheet impact was
felt when the sold assets went away from the Balance sheet and the due proceeds were received. Even the cash flow statement
was affected as the funds from the sale of assets showed cash inflow of A$180m
14. Conclusion
The company analysis of Bega Cheese Ltd. shows that it has a sound
financial position as depicted in the various ratios of profitability,
liquidity, efficiency and gearing as analysed above. The company has
managed to maintain its profitability and has been able to perform
better than its industry peers even in the face of stiff competition and a
significant turmoil in the dairy industry which has been severely
affected by low prices and a shift in the global dairy demand and
supply balance. The company has a robust liquidity position, and its
management has shown efficiency in the operations and optimal
control of the company assets. It has acquired the necessary debt to
achieve its financial objective.
15. Appendices
PROFITABILITY RATIOS:
• Return on shareholders equity=Profit available/average shareholders equity * 100
2020 =66,055/288,170
x 100 = 22.92%
2021=12,408/313,527
x 100 = 3.96%
2022= 28,779/320,252
x 100 = 8.99%
16. • Return on assets: Net profit before interest and tax/average total assets
*100
2020=93,580/548,929
x 100 = 17.05%
2021=16,434/550,528
x 100 = 2.99%
2022=39,900/569,547
x 100 = 7.01
17. • Net profit margin= Net profit before interest and tax/sales *100
2020=93,580/1,069,392
x 100 = 8.75%
2021=16,434/1,112,630
x 100 = 1.48
2022=39,900/1,195, 967
x 100 = 3.34%
18. Efficiency ratios
• Inventory turnover ratio: average inventory/cost of sales *100
2020 = 173,597/951,117
x 365 = 66.62 days
2021 = 189,528/991,538
x 365 = 69.75 days
2022 = 193,644/1,042,595
x 365 = 67.78 days
19. • Settlement period for accounts receivable: average accounts
receivable/sales revenue *100
2020 = 105,068/1,069,392
x 365 = 35.88 days
2021 = 113,084/1,112,630
x 365 = 37.08 days
2022 = 131,591/1,195,967
x 365 = 40.15 days
20. • Settlement period for accounts payable: average accounts
payable/purchases *100
2020 = 153,421/972,257
x 365 = 57.60 days
2021 = 151,617/1,023,400
x 365 = 54.09 days
2022 = 147,563/1,040,104
x 365 = 51.79 days
21. • Assets turnover ratio: average total assets/sales *365 days
2020 = 548,929/1,069,392
x 365 = 187.36 days
2021 = 550,528/1,112,630
x 365 = 180.60 days
2022= 569,547/1,195,967
x 365 = 173.82 days
22. Liquidity ratios
• Current ratio: current assets/current liability
2020 = 321,541/212,170 = 1.52 times
2021 = 328,589/179,287 = 1.83 times
2021 = 346,274/209,253 = 1.65 times
• Quick asset ratio: current asset-(inventories + prepayments)/current liabilities
2020 = 137,374/212,170 = 0.65 times
2021 = 133,700/179,287 = 0.75 times
2022 = 153,876/209,253 = 0.74 times
24. Gearing ratios
• Gearing= non-current liabilities/total equity +non current liabilities
x 100%
2020 = 22,079/336,467 x 100 = 6.56%
2021 = 60,466/373,132 x 100 = 16.20%
2022 = 49,583/377,421 x100 = 13.14 %
• Debt to total assets = total liabilities/total assets *100%
2020 = 234,249/548,637 x 100 = 42.70%
2021 = 239,753/552,419 x 100 = 43.40%
2022 = 258,836/586,674 x 100 = 44.12%
25. References
Australia, D., 2017. A guide for investment and the Australian dairy industr,s.l.: Dairy Australia Limited.
AFN, 2022. Bega Cheese publishes its first sustainability report. [Online] Available at:
http://www.ausfoodnews.com.au/2022/07/06/bega-cheese-publishes-its-first-sustainability-report.html
Morningstar, 2018. DatAnalysis Premium, s.l.: Moriningstar Inc..
Annual Report, 2022. Bega Cheese Ltd. - Annual Report, s.l.: s.n.
IBIS World, 2018. Cheese Manufacturing in Australia: Market Research Report. [Online] Available at:
https://www.ibisworld.com.au/industry-trends/market-research- reports/manufacturing/food-product/cheese-
manufacturing.html
Gibson, C., 1987. How Chartered Financial Analysts View Financial Ratios. Financial Analysts Journal, 43(3), pp. 74-76.
Birt, J. et al., 2017. Accounting: Business Reporting for Decision Making. 6th ed. s.l.:John Wiley & Sons Australia, Ltd.
Hays, F. H., De Lurgio, S. A. & Gilbert, J. A. H., 2009. Efficiency Ratios and Community Bank Performance. Journal of Finance
and Accountancy, pp. 1-15.
Ehrhardt, M. C. & Brigham, E. F., 2011. Financial Management Theory and Practice. Mason(Ohio): South-Western Cengage
Learning.Muradoglu, G., Bakke, M. & Kvernes, G. L., 2005. An investment strategy based on gearing ratio. Applied Economic
Letters
