Bega Cheese is selling its relatively new Derrimut infant formula canning plant in Melbourne and one of its spray milk powder dryers to long-time nutritional formula customer, Mead Johnson.
The $200 million deal strategically bolsters the company’s balance sheet as Bega finalises its $460 million deal to buy Mondelez’s Australian grocery business, including spreads such as Vegemite.
The sale of the nutritional formula finishing plant and the spray dryer at Tatura in northern Victoria has been accompanied by a 10-year service agreement with Mead Johnson, ensuring Bega will have access to product from the sites to supply its own customers.
Last week Bega announced a $15.7 million profit after tax for the first half of the 2016-17 year, up 8.2 per cent, with revenue up 10.6 per cent to $621 million.
The result was achieved despite challenging global dairy markets, particularly in the competitive cheddar cheese cut and pack and processed cheese sectors.
It also made a $7.1 million pre-tax inventory impairment for nutrition powder product stock held by the Bemore partnership – Bega’s underperforming new joint venture company with vitamin business, Blackmores.
The Derrimut plant was commissioned in 2015 to take advantage of Bega’s booming sales of nutritional powder to an expanding customer base.
It had previously been making infant formula on contract to the US pediatric nutrition company Mead Johnson, and other customers, for more than a decade.
This week’s deal was foreshadowed in January to help offset the cost of Bega’s purchase of the Kraft spread, salad dressing and cheese brands from Mondelez.