Maggie Beer Holdings (MBH) has put the planned investment into Paris Creek Farms on hold after a 10 per cent drop in revenue and is in advanced conversations with a third-party supplier to produce its Maggie Beer cheese.
But CEO Kinda Grange said while overall market conditions were challenging, sales growth for MBH in the second quarter was pleasing.
In 1H24, Maggie Beer Products (MBP) recorded a 4.1 per cent increase in sales versus the prior corresponding period (pcp) to $17.8 million. Hampers and Gifts Australia (HGA) increased 2.5 per cent to $33.7 million, while Paris Creek Farms dropped 12 per cent to $7.5 million. It saw MBH record a non-cash impairment of $4.6 million against PCF and its future on the company again on hold.
“In response to the continuing market challenges, we are accelerating strategic initiatives in the second half and delivering operational initiatives to recover cost inflation and generate efficiencies across manufacturing,” Grange said.
Snapshot
- Net sales: up 0.9% to $58.9m on pcp;
- Online sales: up 6.8% pcp;
- Supermarket sales: up 2.9% pcp
- Paris Creek Farms net revenue: down 10.6% in Q2
- Sales growth in MBP of 7.4 per cent in Q2 due to category expansion in Cooking products (stocks, broths, finishing sauces) in Coles and the launch of Ice Cream into Woolworths.
New ranges, partnerships (e.g., Penfolds), and a more personalised approach to corporate sales in HGA saw 7.9 per cent growth, with Corporate delivering a 20 per cent growth in Q2 versus pcp.
MBH is still in dispute resolution with the HGA vendors, saying it maintains its position there is no obligation to pay an earn-out because the earn-out hurdle was not met.
PCF’s drop in net revenue was largely due to a decline in bulk milk sales, the company said. The carrying value of PCF’s property, plant, and equipment for PCF is $4.8 million, with $4.7 million of that being the land and buildings.
MBH said it will be more cost efficient to leverage a large-scale manufacturer to supply Maggie Beer cheese and that it’s “well advanced” in discussions with a third-party supplier to do so. That decision has put the planned capital expenditure on PCF’s cheese operation on hold.
In June last year, PCF’s for sale sign was taken down, with MBH deciding to sweat the asset into a “financially and operationally sustainable dairy manufacturing asset” to manufacture MBP cheeses and other products. It also saw a lucrative channel in HGA, with its cheese hampers generating $2.9 million in revenue in FY23.
IN 2022, MBH had declared PCF and St David Dairy non-core assets. St David Dairy was sold in September that year to Goulburn Valley Creamery for $1.6 million.
