Business sours as SA dairy firm calls in administrators
Two dairy factories and 159 jobs are on the line after Beston Global Food Company entered administration following an acquisition offer failure.
Beston Global Food Company announced to the ASX yesterday that it had appointed KPMG as its administrator on Friday, September 20.
“The Administrators current intention is to continue to trade Beston while an assessment of trading is undertaken and options for its sale and/or recapitalisation are explored,” KPMG said.
Beston said it had been working to address the company’s issues for some time, having divested its meat processing subsidiary, Provincial Food Group, for $4 million in July, and looking for buyers for its dairy factories in Murray Bridge and Jervois.
The company said it had received “several” non-binding indicative offers around refinancing and equity solutions for the business, including an offer from Japanese Megmilk Snow Brands for the acquisition of its Jervois facility and business.
However, Beston said Megmilk had advised on September 20, the same day administrators were appointed, that they would not proceed with its previous offer following extensive due diligence.
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“Accordingly, the Directors have formed the opinion that Beston should be placed into voluntary administration and allow time to evaluate options for Beston,” the company said.
“The decision of the Board has not been taken lightly, and is unavoidable in the circumstances.”
The company said it had 159 staff, including 29 casuals.
Beston CEO Fabrizio Jorge expressed his disappointment in the failed Megmilk offer when announcing the administration.
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“The Megmilk offer would have enabled all of the jobs at Jervois to be preserved and would have led to an increase in demand for milk processing at the Jervois factory over time,” Jorge said.
“It would have represented a win for the workers, a win for our loyal dairy farmers and ultimately would have been a win for the whole of South Australia as the significance of the Jervois plant in producing premium quality, health enhancing products from dairy have become increasingly recognised around the world via the global marketing and distribution networks of Megmilk Snow Brands.”
This was not the first failed international deal for the company, with a proposed long-term agreement between Beston and Thailand-based KCG Corporation for import and distribution set aside due to unresolved matters.
Beston said it had been affected by adverse trends in dairy prices, and increasing operating costs, after its dairy business recorded record sales in the 2023 financial year of circa $170 million amid a $48.85 million loss.
The company said it had absorbed around $28 million of additional costs in FY23, with a 300 per cent increase in energy prices among “exceptionally high operating costs at a time when 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 have also impacted on the Beston’s sales margins and short-term liquidity,” it said.
The company also said the Australian Dairy Code, which was introduced in 2019, did “not recognise the volatile nature of dairy markets globally, nor allow appropriate price signals to be captured through the movements in supply and demand”.
Beston said the code had “contributed to the closure of 11 dairy processing businesses in Australia in the past 18 months”.
Beston was one of 45 accredited dairy processors in South Australia in 2023 according to Dairysafe’s annual report, down from 47 the previous year.
The dairy authority reported a 99.6 million litre decrease in South Australian milk production in 2022 compared to 2012.
