Bega Cheese has announced it will cease cheddar and mozzarella production at its facility in Coburg, Victoria, as it gears up for a $34 million lactoferrin facility construction project in the same state.
The dairy company, which earlier this month announced it would construct a lactoferrin facility at the former MG-owned Koroit site after securing a long term supply agreement, says it will close the Coburg site effective immediately.
Some staff will be offered employment at other Bega sites, but many will be made redundant, the company said.
The facility, which is located in Melbourne’s northern suburbs, was acquired by Bega in 2009 to manufacture cheese for private label and food service customers.
Bega Cheese said the decision to close the site was made following “a review of our network which concluded that the Coburg site’s capacity and city location cannot viably support Bega's expected future growth”.
Instead, Bega will source cheddar and mozzarella cheese for domestic and international markets from Bega’s other dairy sites and toll manufacturing arrangements.
The company announced it had entered into a third party cheddar and mozzarella toll manufacturing agreement allowing it to “continue to grow our business whilst avoiding additional capital expenditure and retire less efficient assets”.
Lactoferrin is a high value and functional ingredient that is used globally in a range of consumer health and nutritional food products including infant formula. The investment at Koroit will “position Bega as one of the largest manufacturers of lactoferrin globally and is a major step forward in the growth of our bio-nutrients business,” Bega’s CEO Mr Paul van Heerwaarden said.
The plant closure announcement coincided with the release of Bega Cheese's half year results, which saw the company's net profits fall to $5 million, down 76 per cent on the previous corresponding period.
The company pointed to several short-term challenges, such as milk price and milk volumes in some regions due to the drought, slower first half sales in nutritionals, a significant build in inventory, and associated funding costs as a result of the Koroit acquisition and corporate costs.
Bega Cheese's executive chairman Barry Irvin said the company's guidance for the full year remained at a normalised EBITDA of $123 to $130 million.
