FALLING dairy commodity prices and a diversification of its product mix has seen the Bega Cheese Group face short-term challenges that resulted in a loss in its financial year 2015 half yearly report.

The natural and processed cheese manufacturer, owner of Tatura Milk Industries, has a product range encompassing processed cheese, powders and butters and packaged cheese products, in addition to its new ventures, via Tatura, in the nutritional market.

The group generated normalised earnings before interest, tax, depreciation and amortisation (EBITDA) of $31.3 million, compared to $41.8 million in its half yearly report from the same time last year, a decrease of 25 per cent.

Despite the decrease, the company’s strategic initiatives were reflected in an 8pc increase in revenues to $552.5m.

Tatura was particularly impacted by the average 50pc drop in global dairy commodity prices.

Spending on the group’s new infant formula and blending and canning plant at Derrimut in Victoria also impacted results. Growth out of Derrimut is anticipated for the group across the full 2015 financial year.

The group’s Milk Sustainability and Growth Program, a $25 million venture aimed at securing a sustainable milk supply, saw the first payments to contracted participant farmers in May, 2014.

Now, 90pc of the company’s milk is sourced through the program, which the Bega Cheese Group believes is generating significant on-farm investment.

One objective of the program is to grow milk supply by 20pc.

$21,200,000 was paid out to program participants by December 28, 2014. The remainder of the funds are allocated, so the board agreed to close the program to new applicants from February 4, 2015.

Forecasts for the full year result for the 2015 financial year is for a figure between $25-28m, a downsizing of October 2014’s prediction of $29.7m.

The interim dividend was declared at 4.0 cents, in line with the prior year’s 4.0c, to be paid on March 16, 2015.

Bega shares were trading at 5.20 today.

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