Beston placed into voluntary administration
Beston Global Food Company has announced that on Friday it appointed KPMG as voluntary administrators following "a perfect storm of adverse events in recent times".
"Beston went into COVID with relatively little debt and came out the other side with a debt burden, which has weighed heavily as interest rates have increased," it said in a statement to the ASX.
"In the FY23 year, the first full year, post the COVID-19 pandemic, Beston recorded a trading EBITDA of $4.4 million in its dairy business, as well as record sales of circa $170m, while noting that margins had been squeezed in the second half by adverse trends in global dairy prices.
"The encouraging result delivered during FY23 was a direct outcome of a competitive farmgate price paid to dairyfarmers and the successful expansion of BFC's Lactoferrin business."
However, in the past 12 months, the company has experienced "exceptionally high" operating costs, particularly energy costs, while Australian farmgate milk prices have been uncompetitive in world markets.
"The avalanche of cheaper dairy imports that have reached the Australian market during 2023 and 2024 from overseas producers (including from NZ, Europe and the US) have also impacted on the Beston's sales margins and short-term liquidity," the company stated.
"While the Beston's Lactoferrin and fast-growing Cream Cheese business (which accounts for about 20 per cent of sales) has earned strong profits over this period, the cheese and whey powder business (which accounts for around 80pc of sales) has incurred losses due to the ongoing cost/price pressures."
Beston said it had received several non-binding indicative offers in recent months, including an offer from Japanese company Megmilk Snow Brands to acquire its cheese and lactoferrin production facility at Jervois.
"However, Megmilk Snow Brands advised on Friday that they will not be proceeding with the binding offer," it stated.
"The Directors have formed the opinion that Beston should be placed into voluntary administration and allow time to evaluate options for Beston."
Beston chief executive officer Fabrizio Jorge said that he "deeply regrets" that the Megmilk Snow Brands offer could not be progressed through to completion.
Beston is a listed company and a major processor to the Australian dairy industry with two significant production facilities in regional SA, processing butter, milk, mozzarella, certain other cheeses as well as capturing the lactoferrin protein from the state-of-the-art plant.
KPMG have now assumed day-to-day control of the Australian operations of the company and its subsidiaries, with the intention to continue trading as an immediate assessment of the business is undertaken.
Detailed findings about the company's affairs will also be made public in due course as part of the normal administration process.
KPMG Australia Turnaround & Restructuring partner Tim Mableson said their initial focus would be to "stabilise the business".
"We will be working with stakeholders, farmers, partners and customers to achieve the most optimal outcome," he said.
The administrators are seeking expressions of interest to recapitalise or acquire the business.
"There are significant dairy processing assets across two sites, strong relationships with loyal dairyfarmers throughout SA and into western Vic and established distribution channels both domestically and globally," Mr Mableson said.
All dairyfarmers, suppliers, customers, and key stakeholders will be contacted in the coming days and a meeting of creditors is scheduled for October 2.