Bega Cheese Limited: Financial Analysis and Performance

This report provides a detailed analysis of the financial performance of Bega Cheese Limited, including income statement, statement of financial position, and ratio analysis. It also offers insights into the company's profitability, efficiency, liquidity, and solvency ratios. The report concludes with recommendations for improving the company's performance.

Running Head: BEGA CHEESE LIMITED 0
Bega Cheese Limited

BEGA CHEESE LIMITED 1
Executive Summary
Bega cheese is an Australian dairy company based in the town of New Bega, New South Wales.
It is the agriculture cooperative which is owned by the suppliers of the dairy products. Founded
in the year1899, the company is operating successfully in Australia. The company is listed on the
Australian Securities exchange and is considered to be the largest dairy company in Australia.
The valuation of the company is a$775 million and the Bega Cheese also owns the stakeholder
ship in the Capitol Chilled foods Private Limited @ 25%. In the month of January 2019, Bega
Cheese limited showcased A$460 million deal with multinational food conglomerate known as
Mondelez International to own most of the cheese and the grocery business. Further the company
is involved into the supply of the dairy products and currently the company is operating with the
net income of $28 million along with the sales revenue of $1438 million. This report is directly
showcasing the performance of the Bega cheese limited and the availability of the remedies in
case there are any variances the management had come across during the analysis of the last
three years (Bega Cheese, 2018).

BEGA CHEESE LIMITED 2
Table of Contents
Executive Summary.....................................................................................................................................1
Introduction.................................................................................................................................................3
Income statement.........................................................................................................................................3
Statement of the Financial Position.............................................................................................................5
Ratio Analysis.............................................................................................................................................6
Conclusion.................................................................................................................................................10
References.................................................................................................................................................12
Appendix 1................................................................................................................................................14

BEGA CHEESE LIMITED 3
Introduction
Financial Analysis is an important tool which helps in the determination of the performance of
the company on the basis of analysis of the income statement, statement of financial position,
comparison using the trend analysis and the ratio analysis. In this report a detailed understanding
of these four events have been carried out for the Bega Cheese Limited company (Bega cheese
Limited, 2017).
Income statement
The main focus of any company is on the financial statements of the business and the users of the
financial statements are mainly interested in knowing the profitability position of the business.
The income statement is made in order to report how much profit is generated by the business
and what is the share of the investors. The increase in the equity section of the owners is
reflected by the financial profit earned by the company. The profit in the income statement is
calculated by the deducting the expenses. Further the increase in the income reflects the
enhancement in the economic benefits for the future.

BEGA CHEESE LIMITED 4
2016-06 2017-06 2018-06
0
20
40
60
80
100
120
140
Net income
Net income
Axis Title
The income statement of the Bega Cheese limited showcases that the income of the Bega cheese
was $29 in the year 2016 and it accelerated to $139 in the year 2017. Again the company faced
the downfall due to the excess of the operating expenses (Griffin, 2015). The company has the
pending expenses and poor revenue generation system to cover all the basic expenses and hence
the company faced the fall in the income. The trend of the income statement changed in
comparison to the previous year. However the situation also suggests that there is a scope for
improvement as even after the lot of the operating expenses the company is still making profits
(Bega cheese Limited, 2017).

BEGA CHEESE LIMITED 5
2016-06 2017-06 2018-06
0
200
400
600
800
1000
1200
1400
1600
Revenue
Cost of revenue
Gross profit
(Source: By Author)
Ideally to find out whether the business is operating successfully or not, the sales revenue of the
year shall be greater that the increase in the expenses, which also includes the Cost of goods
sold. Under the horizontal as well as the vertical analysis the Bega Cheese is performing
satisfactorily. The sales revenue increased by 2.6% in the year 2017 and again in the year 2018
the sales increased by 17.2%. With the increase in the sales there was also increase in the cost of
the goods sold. The gross profit also shoots up by 75.5% in comparison to the year 2017. This is
a positive sign for the company and this indicates the market share is changing a bit. Under the
vertical analysis as well the revenue increased with the slow pace but thereafter it increased by
120% and the major change has not been seen in case of the gross profit margin under the
vertical analysis (Robinson, Henry, Pirie & Broihahn, 2015).

BEGA CHEESE LIMITED 6
Statement of the Financial Position
The statement of the financial position also known as the Balance sheet reflects the financial
performance of the business at the particular point of time. It is the bifurcation of the assets and
the obligations of the Bega cheese is having (Di Tella, 2017).
2016-06 2017-06 2018-06
0
500
1000
1500
2000
2500
Total stockholders' equity
Total liabilities
Total assets
(Source: By Author)
The analysis of the Bega Cheese Limited in terms of the total stockholder’s equity, total
liabilities and the assets used to pay back the same has been presented in the for the period of the
year 2016 to 2018. As it can be observed from the graph above the assets, the liabilities and the
shareholder’s equity have been increased gradually over the period of the last three years. The
total assets increased by 80% in the year 2017 and thereafter there was an increase in the year
2018 but with the slow pace that is of 15% as can be observed by the horizontal analysis. Under
the vertical analysis the current assets of the company are forming almost 60% part of the total
assets for the year 2016 and the year 2017. For the rest of the year that is 2018, in case of the
liabilities the liabilities are forming the 19% of the total liabilities and this indicates that the

BEGA CHEESE LIMITED 7
current assets are not sufficient to pay back the current liabilities on time (Uechi, et al 2015).
Moreover the total liabilities have increased over the period of the three years and the assets have
increased too. The long term debt of the company just multiplied by 5 times form the year 2016
to 2017 at 215 in dollars, whereas the current assets just multiplied by 3 times (ElFayoumi,
2018).
As a result the liabilities of the company are increasing more than the current assets and this is
the situation that the company needs to monitor and take care of.
Ratio Analysis
Profitability ratios
Profitability ratios of the company are the ratios which determine how profitable the company is
and how much amount of share is available for the shareholders after payment of the expenses.
The earning per share of the company can only be determined by the company after calculating
the scenario of the profit.
2016 2017 2018
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
Net Profit
Net Profit

BEGA CHEESE LIMITED 8
Net profit ratio is the basic ratio which determines the ability of the company to generate the
revenues out of the sales made during a year. The net profit is the key criteria for any investor,
who has invested in the business, to judge the financial position of the business. The net profit of
the Bega Cheese Limited has increased from the year 2016. Earlier in the year 2016 the net profit
margin was so low at 2.42% and then it gradually increased and reached to 11.33%. As soon as
the position improved the company again falls down in terms of the profit margin and reached to
1.95% which is lower than the year 2016 (Bega cheese Limited, 2017).
Efficiency ratios
Efficiency ratios determine the efficiency of the company in utilizing the assets of the company
to manage the contractual obligations. It is used to measure the performance of the company in
the short term period (Riyadi, 2017).
The asset turnover ratio of the company earlier was 4.07 which indicated that the company is
able to utilize the assets well and thereafter the scenario changed and the assets held by the
company are not utilized in the effective manner or may be the obsolete assets are prevailing
more as the ratio fell down to 2.36 by the end of the year 2018 (Anwar, Fathoni & Gagah, 2018).

BEGA CHEESE LIMITED 9
2016
2017
2018
0.0
10.0
20.0
30.0
40.0
50.0
60.0
Days Inventory Outstanding
Days Payable Outstanding
Days Inventory
Outstanding
Days Receivable
Outstanding
Days Payable Outstanding
The inventory turnover ratio was a fluctuating one but a moderate fluctuation is seen and the
company is performing better in realizing the cash from the inventory soon. Secondly the
company has improved the position in payment to the creditors by reducing the number of days
to 47.4 from 52.3 days. Furthermore, the cash received by the company is in delay and it is
advised to the company to reframe the same so that the cash cycle of the company can be sorted
out (Bega cheese Limited, 2017).
Liquidity ratios
Unser the liquidity position of the company the current and the quick ratio of the company is
calculated to find out the capacity of the company to cater the current liabilities via the assistance
of the current assets.
The current ratio of the company shall be ideally in the ratio of 2:1 However the current ratio of
the Bega cheese is 0.02 and by the end of the year 2018 it is 0.001 which is a drastic situation for
the company and this can lead to the liquidation of the company (Bega cheese Limited, 2017).

BEGA CHEESE LIMITED 10
2016
2017
2018
0.00 0.10 0.20 0.30 0.40 0.50 0.60
Liquidity Ratios
Quick Ratio
Current Ratio
The quick ratio of the company on the other hand was fair in the year 2017 but in the year 2018
again the ratio was deteriorated.
Solvency ratios
Solvency ratios or the capital structure ratios reflect how the business is financing the assets of
the company like Bega Cheese to assess the level of the business risk and the long term solvency
ratios. The gearing ratio can accelerate the returns of the owners when the returns generated via
the borrowed funds are excessive of cost related to the payment off the interest (Chan-Lau, et al
2017).
The debt to Equity ratios
The debt to equity ratio is the bifurcation of the funds raised through the debt and equity. The
debt to equity ratio of the Bega Cheese is 0.79 in the year 2016, followed by 0.84 and 0.92 for
the financial year 2017 and 2018. This culminated that the 79% of the assets are financed by the
outsiders and it reached to 92% by the end of the 2018 (Muritala, 2018).

BEGA CHEESE LIMITED 11
2016 2017 2018
-30.00
-25.00
-20.00
-15.00
-10.00
-5.00
0.00
5.00
10.00
15.00
Solvency Ratios
Debt to Equity
Times interest coverage
ratio
Debt to Total Assets
Times interest coverage ratio has been 14.6 times which the cost of thee financing is above
average. In the successive years the interest coverage ratio turned out to be negative due to
negative income. Therefore it can be clearly said that the Bega cheese company cannot readily
pay the interest expenses as its operating income is negative in nature even though the company
is improving (Du, Tepper & Verdelhan, 2018).
Conclusion
From the above analysis the conclusion that has been drawn is that the performance of the Bega
cheese is poor and unsatisfactory in most of the areas and the management shall be cautious of
the fact that how the situation can be improved. To improve the situation the company needs to
shift its focus to current and quick ratio by reusing the assets efficiently and disregarding the
obsolete assets. Furthermore, the company shall also keep a consistent profit margin to maintain
the net profit. The future performance of the company can be changed only if the company takes
the initiative from the present moment.

BEGA CHEESE LIMITED 12
References
Anwar, S., Fathoni, A., & Gagah, E. (2018). ANALYSIS OF THE EFFECT OF CURRENT
RATIO, TOTAL TURN OVER ASSETS, DEBT TO EQUITY RATIO AND NET
PROFIT MAGRIN ON CHANGES OF PROFIT WITH ON EQUITY RETURN AS
INTERVENING VARIABLES ON PHARMACEUTICAL COMPANIES LISTED IN
INDONESIA STOCK EXCHANGE (BEI) 2013-2017 PERIOD. Journal of
Management, 4(4).
Bega cheese Limited, (2017). Annual report 2017. Retrieved from
file:///C:/Users/System04087/Downloads/2983124_965098662_ASXBGA2017%20(1).p
df
Bega Cheese, (2018). Overview.Retrieved from https://www.begacheese.com.au/
Chan-Lau, M. J. A., Lim, C. H., Rodríguez-Delgado, J. D., Sutton, M. B. W., & Tashu, M.
(2017). Bottom-Up Default Analysis of Corporate Solvency Risk: An Application to Latin
America. International Monetary Fund.
Di Tella, S. (2017). Uncertainty shocks and balance sheet recessions. Journal of Political
Economy, 125(6), 2038-2081.
Du, W., Tepper, A., & Verdelhan, A. (2018). Deviations from covered interest rate parity. The
Journal of Finance, 73(3), 915-957.
ElFayoumi, K. (2018). The balance sheet effects of oil market shocks: An industry level
analysis. Journal of Banking & Finance.

BEGA CHEESE LIMITED 13
Griffin, P. A. (2015). Financial Statement Analysis. Finding Alphas: A Quantitative Approach to
Building Trading Strategies, 119-125.
Muritala, T. A. (2018). An empirical analysis of capital structure on firms’ performance in
Nigeria. IJAME.
Riyadi, S. (2017). Financial performance efficiency of Indonesia government banks in improving
profitability. International Journal of Financial Innovation in Banking, 1(3-4), 239-252.
Robinson, T. R., Henry, E., Pirie, W. L., & Broihahn, M. A. (2015). International financial
statement analysis. John Wiley & Sons.
Uechi, L., Akutsu, T., Stanley, H. E., Marcus, A. J., & Kenett, D. Y. (2015). Sector dominance
ratio analysis of financial markets. Physica A: Statistical Mechanics and its
Applications, 421, 488-509.

BEGA CHEESE LIMITED 14
Appendix 1
Bega Cheese Limited CashFlowFlag INCOME
STATEMENT
Fiscal year ends in June. AUD in thousands except per share
data.
2016-
06
2017-
06
2018-
06
BEGA CHEESE LTD (BGA) CashFlowFlag INCOME
STATEMENT
Fiscal year ends in June. AUD in millions except per share data.
Revenue 1196 1227 1438
Cost of revenue 1043 1072 1166
Gross profit 153 155 272
Operating expenses
Sales, General and administrative 73 246 342
Other operating expenses -124 247 31
Total operating expenses -51 493 373
Operating income 204 -339 -101
Interest Expense 14 13 11
Other income (expense) -160 540 162
Income before taxes 30 188 50
Provision for income taxes 11 59 22
Net income from continuing operations 19 129 28
Net income 19 129 28
Net income available to common shareholders 19 129 28
Bega Cheese Limited CashFlowFlag balance Sheet
Fiscal year ends in June. AUD in thousands except per share
data.
2016-
06
2017-
06
2018-
06
Assets
Current assets
Cash
Cash and cash equivalents 10 476 22
Total cash 10 476 22
Receivables 133 142 178
Inventories 192 168 232
Deferred income taxes 5 14
Prepaid expenses 1 5 18
Other current assets 9 23 6
Total current assets 345 819 470
Non-current assets
Property, plant and equipment

BEGA CHEESE LIMITED 15
Gross property, plant and equipment 522 494 650
Accumulated Depreciation -302 -297 -326
Net property, plant and equipment 220 197 324
Equity and other investments 2 2 2
Goodwill 229
Intangible assets 10 23 182
Deferred income taxes 10 16 4
Other long-term assets 6
Total non-current assets 242 238 747
Total assets 587 1057 1217
Liabilities and stockholders' equity
Liabilities
Current liabilities
Short-term debt 15 0 0
Capital leases 0
Accounts payable 134 135 181
Deferred income taxes 5 64 7
Other current liabilities 55 68 90
Total current liabilities 209 267 278
Non-current liabilities
Long-term debt 48 215 267
Capital leases 0
Deferred taxes liabilities 37
Pensions and other benefits 2 2 2
Total non-current liabilities 50 217 306
Total liabilities 259 484 584
Stockholders' equity
Common stock 104 225 275
Other Equity 21 22 22
Retained earnings 203 326 336
Accumulated other comprehensive income 0 0 0
Total stockholders' equity 328 573 633
Total liabilities and stockholders' equity 587 1057 1217
Horizontal Analysis
BEGA CHEESE LTD (BGA) CashFlowFlag
INCOME STATEMENT
Fiscal year ends in June. AUD in millions except per
share data.
20
16
20
17
20
18
201
6
201
7
201
8
Revenue
11
96
12
27
14
38
2.6
%
17.2
%

BEGA CHEESE LIMITED 16
Cost of revenue
10
43
10
72
11
66
2.4
%
8.8
%
Gross profit
15
3
15
5
27
2
0.2
%
75.5
%
Operating expenses
Sales, General and administrative 73
24
6
34
2
14
% 39%
Other operating expenses
-
12
4
24
7 31
31
%
-
87%
Total operating expenses -51
49
3
37
3
45
%
-
24%
Operating income
20
4
-
33
9
-
10
1
-
45
%
-
70%
Interest Expense 4 3 11 0%
267
%
Other income (expense)
-
16
0
54
0
16
2
59
%
-
70%
Income before taxes 40
19
8 50
13
%
-
75%
Provision for income taxes 11 59 22 4%
-
63%
Net income from continuing operations 29
13
9 28 9%
-
80%
Net income 29
13
9 28 9%
-
80%
Net income available to common shareholders 29
13
9 28 9%
-
80%
Vertical Analysis
BEGA CHEESE LTD (BGA) CashFlowFlag
INCOME STATEMENT
Fiscal year ends in June. AUD in millions except per
share data.
20
16
20
17
20
18
201
6
201
7
201
8
Revenue
11
96
12
27
14
38
100
%
103
%
120
%
Cost of revenue
10
43
10
72
11
66
87
%
90
% 97%
Gross profit
15
3
15
5
27
2
13
%
13
% 23%
Operating expenses
Sales, General and administrative 73
24
6
34
2 6%
21
% 29%

BEGA CHEESE LIMITED 17
Other operating expenses
-
12
4
24
7 31
-
10
%
21
% 3%
Total operating expenses -51
49
3
37
3 -4%
41
% 31%
Operating income
20
4
-
33
9
-
10
1
17
%
-
28
% -8%
Interest Expense 4 3 11 0% 0% 1%
Other income (expense)
-
16
0
54
0
16
2
-
13
%
45
% 14%
Income before taxes 40
19
8 50 3%
17
% 4%
Provision for income taxes 11 59 22 1% 5% 2%
Net income from continuing operations 29
13
9 28 2%
12
% 2%
Net income 29
13
9 28 2%
12
% 2%
Net income available to common shareholders 29
13
9 28 2%
12
% 2%
Horizontal Analysis
Bega Cheese Limited CashFlowFlag balance Sheet
Fiscal year ends in June. AUD in thousands
except per share data.
2016
-06
2017
-06
2018
-06
2016
-06
2017
-06
2018
-06
Assets
Current assets
Cash
Cash and cash equivalents 10 476 22
4660
% -95%
Total cash 10 476 22
4660
% -95%
Receivables 133 142 178 7% 25%
Inventories 192 168 232 -13% 38%
Deferred income taxes 5 14
180
%
Prepaid expenses 1 5 18
400
%
260
%
Other current assets 9 23 6
156
% -74%
Total current assets 345 819 470
137
% -43%
Non-current assets

BEGA CHEESE LIMITED 18
Property, plant and equipment
Gross property, plant and equipment 522 494 650 -5% 32%
Accumulated Depreciation -302 -297 -326 -2% 10%
Net property, plant and equipment 220 197 324 -10% 64%
Equity and other investments 2 2 2 0% 0%
Goodwill 229
Intangible assets 10 23 182
130
%
691
%
Deferred income taxes 10 16 4 60% -75%
Other long-term assets 6
Total non-current assets 242 238 747 -2%
214
%
Total assets 587 1057 1217 80% 15%
Liabilities and stockholders' equity
Liabilities
Current liabilities
Short-term debt 15 0 0
-
100
%
Capital leases 0
Accounts payable 134 135 181 1% 34%
Deferred income taxes 5 64 7
1180
% -89%
Other current liabilities 55 68 90 24% 32%
Total current liabilities 209 267 278 28% 4%
Non-current liabilities
Long-term debt 48 215 267
348
% 24%
Capital leases 0
Deferred taxes liabilities 37
Pensions and other benefits 2 2 2 0% 0%
Total non-current liabilities 50 217 306
334
% 41%
Total liabilities 259 484 584 87% 21%
Stockholders' equity
Common stock 104 225 275
116
% 22%
Other Equity 21 22 22 5% 0%
Retained earnings 203 326 336 61% 3%
Accumulated other comprehensive income 0 0 0
Total stockholders' equity 328 573 633 75% 10%
Total liabilities and stockholders' equity 587 1057 1217 80% 15%

BEGA CHEESE LIMITED 19
Vertical Analysis
Bega Cheese Limited CashFlowFlag balance Sheet
Fiscal year ends in June. AUD in thousands
except per share data.
2016
-06
2017
-06
2018
-06 2016 2017 2018
Assets
Current assets
Cash
Cash and cash equivalents 10 476 22 2% 45% 2%
Total cash 10 476 22 2% 45% 2%
Receivables 133 142 178 23% 13% 15%
Inventories 192 168 232 33% 16% 19%
Deferred income taxes 5 14 0% 1%
Prepaid expenses 1 5 18 0% 0% 1%
Other current assets 9 23 6 2% 2% 0%
Total current assets 345 819 470 59% 77% 39%
Non-current assets
Property, plant and equipment
Gross property, plant and equipment 522 494 650 89% 47% 53%
Accumulated Depreciation -302 -297 -326 -51% -28% -27%
Net property, plant and equipment 220 197 324 37% 19% 27%
Equity and other investments 2 2 2 0% 0% 0%
Goodwill 229 19%
Intangible assets 10 23 182 2% 2% 15%
Deferred income taxes 10 16 4 2% 2% 0%
Other long-term assets 6 0%
Total non-current assets 242 238 747 41% 23% 61%
Total assets 587 1057 1217
100
%
100
%
100
%
Liabilities and stockholders' equity
Liabilities
Current liabilities
Short-term debt 15 0 0 6% 0% 0%
Capital leases 0
Accounts payable 134 135 181 52% 52% 70%
Deferred income taxes 5 64 7 2% 25% 3%
Other current liabilities 55 68 90 21% 26% 35%
Total current liabilities 209 267 278 81%
103
%
107
%
Non-current liabilities
Long-term debt 48 215 267 19% 83%
103
%
Capital leases 0
Deferred taxes liabilities 37 0% 0% 14%

BEGA CHEESE LIMITED 20
Pensions and other benefits 2 2 2 1% 1% 1%
Total non-current liabilities 50 217 306 19% 84%
118
%
Total liabilities 259 484 584
100
%
100
%
100
%
Stockholders' equity
Common stock 104 225 275 18% 21% 23%
Other Equity 21 22 22 4% 2% 2%
Retained earnings 203 326 336 35% 31% 28%
Accumulated other comprehensive income 0 0 0 0% 0% 0%
Total stockholders' equity 328 573 633 56% 54% 52%
Total liabilities and stockholders' equity 587 1057 1217
100
%
100
%
100
%
Bega Cheese Limited
Liquidity Solvency and Cash Flow Ratios
Liquidity Ratios 2016 2017 2018
Current Ratio Current Assets 0.02 0.02 0.00
Current Liabilities
Quick Ratio Quick Assets 0.25 0.59 0.19
Current Liabilities
Solvency ratios or Gearing ratios
Debt to Equity Debt 0.79 0.84 0.92
Equity
Debt to Total Assets Debt 0.44 0.46 0.48
Total Assets
Profitability
Times interest coverage ratio EBIT 51 -113 -9
Interest Expense
Net Profit Net Profit * 100 2.42% 11.33% 1.95%
Net Sales
Return on Assets Net income 5% 13% 2%
Total Assets

BEGA CHEESE LIMITED 21
Return on Equity Net Income 9% 24% 4%
Total Equity
Asset Turnover Ratio Net Sales 4.07 2.32 2.36
Average total Assets
Activity Ratios
Days Inventory Outstanding Inventory * 365 58.6 50.0 58.9
Cost of goods sold
Days Receivable Outstanding
Accounts
receivable * 365 40.6 42.2 45.2
Credit sales
Days Payable Outstanding
Average Accounts
Payable * 365 46.9 46.0 56.7
Cost of Goods Sold
Cash Cycle 52.3 46.3 47.4