South Australian dairy Beston Global Food Company has gone into voluntary administration after a Japanese takeover offer for one of its factories fell through.
The dairy, which employs almost 300 people, said a “perfect storm” of pandemic-era debt, high interest rates and operating costs, and uncompetitive milk prices had forced it into administration despite recording $170 million in revenue in the last financial year.
“Over the last 12 months, Beston has experienced exceptionally high operating costs particularly due to onerous energy prices at a time when Australian farmgate milk prices have been uncompetitive in world markets,” the company said in a statement.
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“An unintended consequence of the Australian Dairy Code legislation introduced in 2019 (ie, four years after Beston commenced operations) has been to keep farmgate milk prices at high levels and disconnected from the global prices of dairy commodities…
“The business absorbed some $28 million in additional costs in FY23, including a 300 per cent increase in energy prices.
“However, the persistence of cost pressures (particularly with gas, electricity, labour, chemicals and transport) in continuing to push up the cost of goods in FY24… have adversely impacted profits and cash flows.”
The decision to appoint KPMG as voluntary administrators on Friday came immediately after Japanese brand Megmilk Snow Brands withdrew its offer to take over Beston’s dairy factory in the South Australian town of Jervois.
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“Snow Brands undertook very extensive due diligence investigations including with visits to our factories, our farmers, our customers and bankers, and by successfully using the dairy fractionation plant at Jervois to trial the manufacture of nutraceutical product to their own specifications,” Beston’s statement said.
“Notwithstanding the positive findings from the Megmilk Snow Brands due diligence process, it became apparent that agreement could not be reached on the terms and conditions of a sale that was acceptable to all parties.
“Accordingly, the directors have formed the opinion that Beston should be placed into voluntary administration and allow time to evaluate options for Beston.
“The decision of the board has not been taken lightly, and is unavoidable in the circumstances.”
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KPMG administrators say they intend to continue to run Beston while they assess the business and weigh up sale and restructuring options.
Beston says it employs “almost 300” staff.
It produces the Beston’s Edwards Crossing and Mables dairy labels, as well as exporting produce overseas.
It claims to be the seventh-largest dairy company in Australia and the largest outside the multinational brands.
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