Bega Group Reports 10% Cost Increase Amid Red Sea and Middle East Disruptions

The closure of the Strait of Hormuz has driven up oil prices and contributed to supply chain shocks that added 10 percent to Bega Group's costs, chief executive Peter Findlay said. Supply chain shocks associated with the war in the Middle East had already pushed up expenses before the latest oil price surge.

Higher costs include packaging due to the closure of the Strait of Hormuz pushing up the price of resin used to make plastic.

Costs for the chemicals needed for Bega's factory cleaning are rising, as are costs for the rubber used in Bega's machinery and seals. Bega Group is paying farmers more for dairy. Dairy producers are battling supply shocks including soaring diesel and fertiliser prices.

"We're trying to fully match that," Peter Findlay said of the financial support for Bega's dairy farmers. "It's quite difficult. " Bega Group was passing a large chunk of its extra costs onto consumers but was actually absorbing some of it at this stage, Findlay said.

"We'll just have to see how long the crisis goes for," he said. " Bega Group is evaluating the crisis every month. "If it keeps going, costs will stay elevated," Bega Group chief executive Peter Findlay said.

Australia's two biggest supermarkets have already increased the price of home-brand milk. Woolworths chief executive Amanda Bardwell noted that fresh produce and dairy were seeing the first round of war-related price spikes in stores. Packaged items are expected to see price increases next.

"We do expect to see, unfortunately, prices increase in some products over the next three, six and possibly 12 months," Amanda Bardwell said during a financial update briefing last week. 7 percent. Automotive fuel prices jumped by more than 30 percent in March.

7 percent in March alone. 35 percent this week. The RBA's statement on monetary policy for May warned about secondary price increases still to come.

"Broader pass-through of fuel costs is expected from the June quarter onwards," the statement said. " Bega's Mr Findlay expects workers to push for higher wages to deal with surging inflation. "You'll have to link your wages to increased costs of living," he said.

Bega has made about 800 workers redundant in recent years and is now down to 3,200 employees. Bega has reduced the number of its food factories in Australia. Closing factories helped the company grow its productivity.

Bega has grown the business from a volume perspective at more than 4 percent over the last three years, Findlay said. Bega Group's grocery lines include Bega cheese, Vegemite, Yoplait yoghurt, Big M, and other dairy products. Bega Group's last financial reports showed revenue up 5 percent for the half year to December.

Net profit rose 55 percent to $46 million for the half year to December.