Beston Global Food company to sell meat business to focus on dairy

Beston Global Food Company is looking to sell its Victorian meat business to focus on its core dairy operations and pay down debt.

Beston chairman Dr Roger Sexton.

Beston Global Food Company is looking to sell its loss-making meat business, along with its Aqua-Essence water business and its technology business as it aims to refocus its efforts around its dairy business and pay down debt.

The Adelaide-based food producer’s shares have plunged over the past few months, trading at times at less than 1c, down from a 12-month high of 8.6c, as hopes of achieving profitability evaporated earlier this year.

The company has grown revenue solidly for the past few years, but has not turned a profit since it was listed by chairman Roger Sexton in late 2015.

In January Beston was forecasting EBITDA in the range of $8-$10m, however downgraded this in March to $0-$2m.

The company’s most recent announcement to the ASX, last week, says the core dairy business will turn over more than $170m this financial year and deliver a trading EBITDA of about $5m, not counting the impact of abnormals.

Beston posted a half year loss of $2.1m on revenues of $90.6m in February and had $33m in debt, down from $47.8m after a $28.2m capital raising late last year, $16m of which was used to pay down debt owed to its main financier, the NAB.

The company said at the time that business was looking up, with its investment in lactoferrin production paying off, and all of its product for the current financial year contracted and sold at high margins.

By March Beston downgraded its EBITDA outlook however, saying a “rapid and significant decline’’ in whey protein prices and cost pressures such as gas and insurance price increases were to blame, while the underlying business “remains solid’’.

Last week the company said the cost pressures had caused a rethink of its strategy.

“The sudden and dramatic escalation in inflationary pressures in Australia over recent months

(particularly around energy prices, insurance costs and interest rates) has caused Beston’s board and management team to refresh the company’s strategy from a growth ambition based around manufacturing and supplying a range of food and beverage products to an intense focus on profitability based around its value-add dairy and dairy nutraceuticals business,’’ the company said in a statement to the ASX.

“Accordingly, the company intends to discontinue and divest its meat and plant-based meat processing operations in Shepparton, Victoria, its water bottling production assets, land and water licenses in Mt Gambier, South Australia and its Beston Technology business.

“The decision will enable Beston to focus all of its resources and efforts on its dairy and dairy nutrition business where the company has built world class capabilities and capacity.’’

The meat business posted a first half pre-tax loss of $1m on revenues of $5.9m and the company said in February the “recoverable amount” of the business was $8.7m at the time.

Beston chief executive Fabrizio Jorge said in a statement the decision to divest the assets was not taken lightly, “but reflects the direct recognition of a need to play to our strengths as a value-add dairy processing and nutrition business in addressing the challenges presented by the inflationary environment now prevailing in Australia, as well as the ever growing expectations of the markets, channels and customers we service’’.

“The decision will enable Beston to accelerate our profitability, and our cash flows.”

Beston’s market capitalisation is now less than $20m.

The company last year racked up its fourth protest vote in a row against its remuneration report - a 44.3 per cent vote against its adoption - which Dr Sexton blamed on “recalcitrant shareholders’’.