Beston Foods goes into administration after Japanese deal falls through

Troubling times have arrived for one of the Murraylands’ biggest employers, with hundreds of workers at Jervois and Murray Bridge.

Beston Foods goes into administration after Japanese deal falls through
It’s business as usual at one of the Murraylands’ biggest employers – for now, anyway. Photo: Peri Strathearn.

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Hundreds of Murraylands jobs hang in the balance after one of the region’s biggest employers entered voluntary administration on Monday.

Times had been tough for some time at the Beston Global Food Company, which operates factories at Murray Bridge and Jervois, due to what its board described as a “perfect storm of adverse events”.

Its problems included a high level of debt which it accrued during the COVID-19 pandemic, and more recently high energy and milk prices.

The last straw came on Friday, when Japanese firm Megmilk Snow Brand pulled out of a deal to sell the Jervois factory which could have saved the company.

The board handed control of the company to administrators from professional services firm KPMG at 4.30pm.

Beston will continue trading for now, and staff will keep their jobs, while KPMG assesses the company and whether it can be sold, or have its debts restructured.

Trading in Beston shares will remain suspended on the Australian Stock Exchange.

“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 board said in a statement.

“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.”

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Chairman Fabrizio Jorge expressed his deep regret that the deal had fallen through.

“The Megmilk offer would have enabled all of the jobs at Jervois to be preserved and would have led to an increase in demand for milk for processing at the Jervois factory over time,” he said.

“It would have represented a win for the workers, a win for our loyal dairy farmers and ultimately would have been a win for the whole of South Australia, as the significance of the Jervois plant in producing premium quality, health enhancing products from dairy have become increasingly recognised around the world.”

Cheese and other products made at Beston's plants in the Murraylands is shipped all over the world. Photo: Beston Global Food Company.

Beston’s board noted that the company had earned $170 million in revenue in 2022-23 and produced $4.4 million in profits, not counting interest, tax, depreciation and loan repayments.

However, its operating costs since then had been “exceptionally high”.

Energy prices had increased by 300 per cent, the board said, and a government-mandated Dairy Industry Code had forced Beston to pay record high prices to milk producers even as the market was flooded with an “avalanche” of cheap imported dairy products.

The code’s inflexibility had contributed to the closure of 11 Australian dairy processing companies in the past 18 months, the board suggested.

“While Beston’s lactoferrin and fast-growing cream cheese business – which accounts for around 20 per cent of sales – has earned strong profits over (2023-24), the cheese and whey powder business – which accounts for around 80% of sales – has incurred losses due to ongoing cost/price pressures,” the board said.

Mr Jorge thanked the management team, factory workers and farmers who had helped Beston develop “world-class” products sold in at least six different countries.

Beston supports about 300 jobs in the Murraylands, including employees, suppliers and contractors.

Murray Bridge News understands that the company still owes some farmers for several months’ worth of milk supply.

KPMG urged any party interested in acquiring the company and its assets to email beston@kpmg.com.au.

A creditors’ meeting will be held next Wednesday, October 2.

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