Well, I just looked to the back of the room and the doors are closed. I guess that means we are ready to start. Hi, everyone, and welcome to the annual general meeting for Bega Group Limited. Obviously, this is a very formal meeting, so forgive me for reading my speech. As you all know, it is not my style, but it is very important that we get the formalities right on important days such as this. I will begin my presentation.
For those that are joining online, I will call out the slide numbers so people can follow. Welcome to the Bega Group Annual General Meeting, which is being recorded and webcast. Sorry, I am going to just move that down a bit. I might go that way. As we have a quorum, I now declare the meeting open. When you registered this morning, you will have received an admittance card.
For all shareholders and proxy holders who are voting, you should have received a yellow voting card. If you are a shareholder who is not voting, you should have received a blue card. If you are a non-shareholder, you will have received a red card. Yellow card holders will be able to vote for or against resolutions and ask any questions they may wish relating to the business of the AGM. Blue card holders will be able to ask questions but not vote. Red card holders are most welcome at the meeting, but will be unable to participate in proceedings. Further information regarding voting procedures will be provided prior to the commencement of the resolutions to be put to the meeting. Shareholders attending this meeting in person and online are able to ask questions.
For those shareholders attending in person, I would ask that you identify yourself before asking a question. For those shareholders attending online, please follow the process contained in the online guide. The Company Secretary, Brett Kelly, will then read out your question. For slide three of the agenda. At today's meeting, we have a number of formalities to deal with, including the consideration of the Group's 2026 annual report, the adoption of the remuneration report, and the election of Directors. Slide four. Welcome. I am pleased to welcome new shareholders and our long-term shareholders who know the company so well and have supported the strategy and Directors of the company over many years. Let me introduce my fellow Directors, Raelene Murphy, Janette Kendall, Peter Margin, Terry O'Brien, Harper Kilpatrick, and Rick Cross. Unfortunately, due to an urgent family matter, Patria Mann is unable to join us today.
I am also pleased to welcome Sam Lobley, representing our auditors. Sam is over there. PricewaterhouseCoopers, Laura Hartley and Li-Xin Chu from Addisons Lawyers, who are down the front here with us. Regi Harbron from MUFG Corporate Markets Limited, and a number of Bega Group staff. As I mentioned, we have apologies from Patria Mann and Donna and Steve Solway. We will now move on to the formal part of the meeting. Slide five. Thank you for all joining us at our annual general meeting. Having presented the Bega Group story for many years, I remain as confident as ever in the company's position and strategy. As you know, our long-term strategy has been to transform a small, cooperative and commodity-focused business-to-business operation into a branded consumer company with significant growth opportunities. The company's history is always significant to us.
Without going into detail, this slide represents well the approach that has been taken over generations. We have built strong foundations. We have always looked for opportunities to expand. We recognize the importance of having a balanced business as we grow. We create strength and capability with a constant eye to the future. Today, the business has a portfolio of strong brands supported by deep supply chain and operational expertise. During the past year, we have demonstrated our agility and resilience in all circumstances and continue to create opportunities for the future. Our CEO, Pete Findlay, will discuss the performance of the company in more detail. While there is more work to do, significant opportunities exist in Australia and across our neighboring international markets. Our vision, purpose and values. Slide six. I would reinforce that the vision to become a great Australian food company is well on its way.
We have built this company on the basis of values that are very important to us. This year, we have made some significant investments in our infrastructure, grown our milk pool with a 7% increase in supply, increased our sales to customers in Australia and around the world, and of course, continued to develop our people, creating a great team that embrace all that we are trying to achieve. Creating long-term competitive advantage. Slide seven. When I think about our business, it is built on a simple model. We want to own mainstream, everyday brands that hold number one and number two positions in their categories, connect strongly with consumers, and are supported by a best-in-class operating network. We have five power brands with leading positions in growing categories.
These brands are supported by strong marketing capabilities, extensive sales and distribution networks, and deep relationships across major retailers, food service customers, distributors, and small business. Our focus is on delivering trusted brands that meet consumer needs and provide compelling value. Supporting those brands is a highly efficient operating model. Our manufacturing scale helps us drive unit costs down, allows us to remain competitive while continuing to invest in growth. We have streamlined and focused our supply footprint to improve service levels, support innovation, and enhance responsiveness to customer needs. At the same time, we continue to invest in technology and automation to further improve productivity and efficiency across the network. The third element of our model is maximizing value for our key ingredients.
We purchase approximately 1.4 billion liters of milk each year, and our ability to generate value from every component of that milk across both our branded and ingredients and nutrition business is a meaningful competitive advantage. Ultimately, success comes from excelling in these three areas: building strong brands, operating an efficient network, and maximizing the value of our milk pool. By continuing to execute against these priorities, we believe we can deliver sustainable growth over the long term. In terms of performance highlights on slide eight, we are very pleased with the financial performance of the business in FY 2026. All our key metrics have demonstrated improvement. Pete will discuss the financial performance in more detail, and you will see this slide again. From my perspective, we have seen revenue growth of almost 7%, profit after tax growth of 36% to AUD 69 million, return on funds employed reached 10%.
We have a very strong balance sheet and have been able to reward shareholders with a 21% increase in dividend, which is fully franked. From my point of view, there have been many highlights this year, and I am pleased to have shared that short overview with you. Bega Group CEO will now present his perspective of the year and provide some more detail on the business performance and position. Pete leads a great team and has demonstrated great leadership in always focusing on the success of the business, its people, and it is important to our customers, suppliers, staff, and communities. I am pleased to introduce Pete Findlay.
Thank you for that introduction, Barry. I will now take you through our FY 2026 performance, the key achievements of the year, and our expectations for FY 2027. Slide 10, key messages. We are pleased with our position at the end of FY 2026. We developed our strategy in the latter part of FY 2023 around a principle, simplify and focus.
That meant concentrating on the channels and categories where we have a right to win, streamlining our asset base to create cost advantages, and improving asset utilization to make the business more efficient. Three years into that five-year strategy, we are confident we are delivering against these objectives. The strategic pillars that we established remain highly relevant and are being executed against effectively. As a result, we have refreshed our 2028 outlook through to 2031 and continue to see significant opportunities ahead. This year's result was driven by a strong brand of performance.
Our focus categories of yogurt, milk-based beverages, spreads, and cream cheese perform well, particularly in international markets. Across these categories, we achieve strong growth through our Better For You innovation pipeline, a trend we expect to continue over the next 5- 10 years. The team has done an excellent job positioning the business to capitalize on this opportunity. Our food service channel, a key strategic focus over the past three years, also delivered a strong result, growing 6%. While this was below last year's growth rate, it was achieved against a backdrop of more subdued consumer sentiment. We believe this performance outpaced the market and remain confident in the channel's growth prospects. Our international branded business continued to perform strongly, particularly in Southeast Asia.
Supply constraints during parts of the year, driven by the Middle East conflict and demand exceeding our medium-term expectations, impacted our ability to fully meet the market opportunity. We continue to see Southeast Asia as a significant long-term growth opportunity. Our bulk business also delivered a strong performance, reflecting the work undertaken following a challenging 2023. We have premiumized much of the portfolio, increased value-added protein in offerings, and better integrated the business with our branded operations, enabling us to capture additional value. Our nutraceuticals and infant nutrition business continues to perform well, strengthening our confidence in its ability to generate value independently of commodity milk price cycles. Supporting this growth has been ongoing focus on efficiency. Continuous improvement remains part of our DNA and is fundamental to how we operate.
As a result, return on funds employed increased to 10%, up 1.6 percentage points on last year, achieving our 2028 target ahead of schedule. Leverage ratio reduced to 0.8x , providing greater flexibility to reinvest in the business through both organic and inorganic opportunities. EBITDA, earnings before interest, tax, depreciation, and amortization, increased by almost 12% year-on-year, delivering a double-digit CAGR, compound annual growth rate, across the three years of our strategy. We believe this compares favorably with peers and highlights the momentum we've built across the business. Slide 11, strong financial metrics. We are particularly pleased that in FY 2026, we were able to grow EBITDA, increase top-line revenue, and expand margins simultaneously. Delivering growth across all three metrics reflects the strength and quality of the business. Net revenue growth was driven by volume, product mix, and pricing.
EBITDA continued its strong double-digit growth trajectory, which is flowing through to earnings per share. As a result, we're not only delivering growth across the business, but also increasing returns to shareholders, as reflected in our higher dividend. Return on funds employed remains one of our most important metrics. Our objective is to maximize the productivity of our asset base and generate strong returns from every dollar of capital employed. Consistently improving returns creates a competitive advantage over time, supports sustainable long-term growth, and helps deliver lower unit costs across the business. Slide 12, our transformation program. Since 2023, we've completed a series of significant initiatives designed to strengthen capability, improve efficiency, and position the business for long-term growth. This has included investments in yogurt and milk-based beverage capability, the installation of new pouch and packaging lines, and upgrades across our manufacturing network to improve productivity and capacity.
We've also simplified and optimized our footprint. This included consolidating manufacturing sites, moving production from Canberra into Penrith, integrating the Betta Milk acquisition into Lenah Valley. Additionally, we have sold the Leeton juice extraction site and our peanut processing assets in Queensland. More recently, we completed the closure of the Strathmerton site, transferring volume into Ridge Street, Bega. Alongside these operational changes, we restructured our corporate head office, reducing costs by more than AUD 20 million annually, while aligning capability more closely with our strategy. We also strengthened our international food service team, and we're now seeing the benefits of these investments through growing sales in key international channels. Innovation has been another key pillar of the transformation. We expanded into lactose-free, no sugar added, and protein products, including the launch of Dairy Farmers protein smoothies and our protein yogurt range.
These initiatives have supported our wellness strategy and are delivering strong growth across several categories. Within ingredients and nutritionals, we repurchased and reconfigured the Tatura dryer to support protein valorization. This has delivered strong results in FY 2026 and is expected to remain an important driver of value creation in the years ahead. We also invested in infant formula canning capability, helping secure and grow our infant nutrition business. To support our customer relationships, we rolled out a new digitally enabled sales portal across our customer base, improving connectivity and service. Importantly, these initiatives have been delivered on time, on budget, and with the outcomes we set out to achieve. They have reduced costs, strengthened our competitive position, created new growth opportunities, and expanded our access to international markets, particularly across Southeast Asia. Looking ahead, we will continue investing in yogurt, cream cheese, and milk-based beverages throughout FY 2027.
These projects support both the wellness trends reshaping our consumer demand and our ambition to expand further into Southeast Asia. As they come online in FY 2028, they will provide the next platform for growth. This track record gives us great confidence in our ability to continue transforming the business and creating value for all of our stakeholders. Slide 13, operating highlights. I will now touch on some of the key operating highlights that demonstrates the progress we have made against our strategy and the strength of our execution across the business.
A major focus has been innovation, particularly in high protein and Better For You products. While delivering strong earnings growth, we have also continued to increase investment behind our five power brands, supporting both brand strength and long-term growth. Internationally, we have continued to expand our presence by investing in specialist capabilities across sales, marketing, consumer insights, market development, and distribution.
These investments are helping us build stronger positions in key export markets and are creating new opportunities for growth. We have also performed strongly in food service. Through continuous innovation and the introduction of new formats, we have strengthened our offer to customers. Our transformed manufacturing footprint now provides a highly cost-competitive position, giving us confidence that we can continue to grow in this channel despite near-term headwinds. Our bulk ingredients business has benefited significantly with increased integration with our branded business. What is especially exciting is the growing integration of our protein capability. As demand for our protein-enhanced branded products continues to grow, a greater proportion of that protein is being supplied internally through our ingredients and nutritional business. This creates additional value across the group and further strengthens the benefits of our integrated operating model. Our infant formula business also continues to perform well.
We remain a manufacturer of choice for customers in this category and are increasingly utilizing our asset base as industry capacity tightens. By maintaining capability while others have exited or reduced participation, we are now beginning to capture additional value from these assets. From an operations perspective, our manufacturing transformation continues to deliver. The successful transfer of production from Strathmerton to Ridge Street within 14 months was an outstanding achievement by the team, particularly given the complexity of managing supply chains during a period of significant global disruption. Our yogurt plant at Morwell is undergoing significant transformation, while Tatura continues to benefit from investment focused on expanding cream cheese capability. These projects support future growth and reinforce our competitive position in attractive categories. Across our distribution network, we continue to optimize efficiency through increased automation of our warehouse at Laverton and the consolidation of facilities.
These initiatives further improve our cost to serve and simplify our operating footprint. Finally, technology, software, and AI remain important priorities for the group. We are already seeing strong outcomes from AI initiatives across pricing, promotion, marketing, back office functions, and our manufacturing operations. We see artificial intelligence and automation as significant opportunities to drive further productivity, improve decision-making, lower costs, and strengthen customer engagement. We will continue investing in these capabilities over the coming years as they represent an important lever for both efficiency and growth across the business. Slide 14, strategic planning. Simplify and focus for growth. The initiatives that I have described above are the key foundations for our next five-year strategic plan, which is outlined on this slide. These priorities provide clear pathway to sustainable growth, improved competitiveness, and long-term value creation through to 2031 and beyond. Slide 15, changing consumer trends.
Consumers are becoming increasingly deliberate about the food and beverages they choose, seeking products that support specific health and lifestyle outcomes. This trend is evident globally and is reshaping the consumer goods landscape, with many companies evolving their portfolios to address these changing needs. In 2025, we undertook extensive consumer research to identify the key trends influencing purchasing behavior. This work resulted in Project Thrive, our consumer-led innovation roadmap that will guide product development across our brand and categories over the next five to 10 years. Our strategy is focused on five key consumer themes: gut health and well-being, weight wellness, everyday performance, treat and reward, and long-term consumer transformation. Overall, these global consumer themes align strongly with our portfolio strengths, and we are investing heavily to ensure we remain well-positioned to capture future growth. Slide 16, market-leading brands in growth categories.
The consumer trends discussed earlier are driving strong growth across our core categories. Importantly, this growth is coming from both volume and value, reflecting increasing consumer demand for products that deliver tangible wellness and functional benefits. These trends are playing directly into categories where we hold leading market positions with number one or number two positions across many of our key segments. This strong market presence, combined with increasing consumer demand for wellness-focused products, positions us well to capture continued growth in the years ahead. Slide 17, top five brand investments driving penetration and category growth. We've significantly increased our investment in marketing, with spend rising by AUD 9 million year on year to strengthen awareness of the functional health benefits across our five key brands.
Our strategy is focused on clearly communicating the value of benefits such as protein, gut health, and overall wellness, using highly targeted digital and social media campaigns to reach consumers more effectively. The results have been encouraging. We're seeing strong engagement, growing reach, and improved consumer awareness, helping reinforce our brand proposition and drive growth across our key wellness-focused categories. This targeted marketing approach is an important enabler of our broader growth strategy, supporting both increased consumer demand and the expansion of our functional health portfolio. Slide 18, our manufacturing network. Our manufacturing network remains a critical enabler of growth and a key source of competitive advantage. The Ridge Street project is a strong example of our approach. We close an aging, underutilized facility and reinvest it in a modern site equipped with state-of-the-art technology.
As a result, we've doubled production capacity, improved efficiency, created a globally competitive operation, and established a platform that is well-positioned to support growth for at least the next decade. This model is consistent with the work underway at Morwell, as well as previous investments across our manufacturing facilities. Slide 19. We've always taken the view that our results and performance are best judged on a normalized basis, removing any one-off financial events that occur in a particular year. Having said that, it is important to understand the key items that have been normalized and the bridge between normalized and statutory results. The material normalization this year were related to our manufacturing footprint rationalization, particularly the closure of Strathmerton and the sale of Peanut Company of Australia. Slide 20, our balance sheet.
We always endeavor to have a strong balance sheet, which positions us well to respond to significant opportunities, either internally or externally. We are always comfortable to increase leverage to build the business, which has been demonstrated on a number of occasions in the past. Slide 21. On this slide is a detailed cash flow, and I would just like to highlight the strong operating cash flow of AUD 129.3 million.
A significant investment in future growth with capital expenditure of AUD 109.8 million and a fully franked dividend of AUD 37.3 million. Slide 22, our outlook. We have entered FY 2027 with a strong outlook and confirm our previous EBITDA guidance range of AUD 240 million to AUD 245 million, with first-half earnings being relatively flat and strong growth in the second half. Growth will be driven primarily by our branded business, supported by a strong innovation pipeline across both yogurt and milk-based beverages.
We continue to see significant opportunities to capitalize on consumer demand for functional health, protein, and wellness products through new product development and range expansion. In addition to revenue growth, earnings will benefit from the productivity and efficiency initiatives implemented over recent years. This includes the closure of the Strathmerton site, the Laverton logistics transformation, and other operational improvement programs that are expected to deliver increasing benefits in FY 2027.
Within the Nutritionals and Ingredients business, several strategic initiatives are progressing well and provide further confidence in the long-term growth outlook. At the same time, we plan to invest approximately AUD 110 million in capital expenditure to expand manufacturing capacity and support future growth opportunities, particularly those expected to emerge in FY 2028 and beyond. In closing, management acknowledge the outstanding contribution of employees whose commitment and discretionary effort have been instrumental in successfully transforming the business over recent years.
Appreciation is also extended to customers, consumers, suppliers, and shareholders for their ongoing support. Overall, the business enters FY 2027 with strong momentum, a robust innovation pipeline, expanding manufacturing capability, a strong balance sheet, and a clear confidence in its long-term growth strategy. Thank you for your attention. I will now hand back to Barry.
I am always aware that the formality of this business creates a very quiet room with little feedback, which makes me always feel like, with great affection to Pete, that Pete and I are very boring men. You will be pleased to know we will be moving to questions in a moment. So thank you, Pete. Before we move into questions, I would like to take a moment to reflect on what has been achieved. For those joining us today, either in person or online, and for those who have followed the evolution of Bega Group for many years, we are delighted to present our FY 2026 results. Our strategy has always been centered on building strong foundations for the future. That means creating the capacity, agility, and resilience required to respond to changing consumer preferences, evolving market conditions, and future growth opportunities.
We always remember that we have been in business for 127 years and are proudly Australian-owned. We, of course, wish to continue to be in business for generations into the future. As our shareholders are aware, Bega Group continues to build a business that is both financially and environmentally sustainable. We have this week released our Better Future report for FY 2026, which is available on our website. I hope today's demonstration has demonstrated the significant progress we have made in strengthening the business. Through continued investment in our manufacturing network, leading brands, product innovation, supply chain capability, and most importantly, our people, we've established a platform that is stronger than it has ever been.
The depth of capability we've built across the organization, combined with the strength of our infrastructure, customer relationships, and portfolio of trusted brands, provides us with confidence in our ability to deliver strong, long-term sustainable growth. While we're proud of the FY 2026 result, we're even more excited about the opportunities ahead. The strategic groundwork laid over many years is now translating into stronger earnings, improved operational performance, and increased growth capacity, positioning us extremely well for the next phase of our journey. Thank you for your ongoing support and interest in the business. We will now open the floor for questions. Are there any questions, including questions for our auditor, Sam Lobley? Yes.
Chair, you're going to,
You're going to put-
Could you identify yourself, please?
Sorry. Steven Targett, a shareholder.
Yes.
You're going to invest significantly in the business in the years ahead, and that's great to see. How's that going to affect the debt? Or is it going to be funded through normal operations?
Well, as Pete mentioned in his presentation, this is a strong cash flow business. So it will be largely funded through operational cash flow. Of course, we're in a period of time now where we are making significant investment. I think in the year just passed, as Pete mentioned, there was over AUD 100 million in investment and there'll be AUD 110 odd million investment in the year ahead of us. We are going through a heavy investment period. But as you would've noted, we've got a very low debt and a very
Yeah
strong cash flow. That will be primarily funded through cash flow.
As a shareholder, we appreciate that.
Thank you.
Thank you, Elton. I could see you shuffle, Elton, so I figured you were about to get up. No. I can.
Hi, Elton Overs, shareholder. Good morning, Mr. Chairman. I am getting a bit confused with this, the S28 strategic plan. It had an objective of AUD 250 million by 2028. Now, in your financial year 2027 guidelines, your guidance, you are giving it AUD 240 million - AUD 245 million. Yet elsewhere when you have gone to do your S31 strategic plan, you are saying you have basically achieved the S28.
I think you would recognize, Elton, that many of the metrics, including that target for next year, is very close to the achievement of that. Some have already exceeded those 2028 targets. And AUD 240 million - AUD 245 million, you are right, we said AUD 250 million, but it is extraordinarily close to those metrics. So we would say what it has caused us to do is to redo the strategic plan out to 2031 because the 2028 plan was fundamentally achieved.
Okay. Yeah, that's where I thought you were going to be achieving it in.
Yeah. So we're very pleased with where we are. This coming current year and obviously that is the ambition.
Okay, thank you. Other question I have got is to do with productivity, the buzzword. That is right, famous word. Productivity only appears nine times in the annual report. Yep. Now, what do we as shareholders, what can we do to assist the company to improve your productivity?
Look, I think it is I will answer that question in a different way. I think it is our responsibility to improve the productivity of the company and the initiatives that Pete has outlined, and I have mentioned, are the focus of improving that productivity. I think anybody following the economic performance of the country overall would recognize that one of the challenges within this country is achievement of productivity. And so we do, we would recognize very much that productivity improvements in the Australian economy overall and the business environment that businesses such as Bega operating is challenged. And it is challenged for a variety of reasons, which I will not go into, because I do not want to make a political speech.
But we are, I would argue that we are one of the few manufacturing businesses that is strongly investing, in reference to the last question, to improve productivity to ensure that we have got a sustainable future. And I think it is recognized in almost all economic circumstances and indeed environmental circumstances, that if you are not investing and you are not creating an environment that builds efficiency, builds capability, responds to market changes, your business will not be sustainable. And so, we are mentioning productivity because it is extraordinarily important. I think if you probably went out into the business world and looked at how many times productivity is mentioned, it is significant, and it is significant because there are significant challenges to achieving productivity improvements in Australia.
Thank you. Yep. The other question I got to do is with risk management in the report. It talks about, I thought under climate change, and I was expecting to see something about the expectation of there being a hot 2026-2027 summer. That normally has such as a drought and that normally has an impact on your milk supply.
Yes.
How is that being addressed? I know one of the ways I notice you're addressing it is through international milk solids purchasing and so forth.
So-
I assume majority of that is from New Zealand.
I'll separate those two questions. So risk management, I always think that risk management in a business such as ours isn't managed in a year. It's managed through positioning, right? In terms of our milk supply, anybody who wanders outside in Bega today and in the last few months, sadly, Bega's living up to its reputation of being the first into drought and the last out.
It's very, very dry in the Bega Valley, and I'm sure the farmers in the room would all join me in saying we hope some of those offshore storms that they're talking about find their way onshore. Throughout the rest of our network, interestingly, El Niño has not been as harsh as we have expected. Our overall milk supply at the moment is predicted to be on budget or around about where we expected. Part of that is the benefit of a geographic footprint across various supply regions across Australia.
If I was to look back at the year just gone, our farmers in Western Victoria had a very difficult time through drought, but it was the only region that did. The El Niño is not yet hitting as hard as we expected. We stay very closely aligned to our farmers and chat about what their needs are. I think, across most of our regions, we would recognize that we had three or four very good seasons where a lot of fodder was conserved and we're seeing the benefit of that fodder conservation in these difficult times. The challenge always in agriculture is how long these weather events go for. But at the moment, I think the risk management comment is to really demonstrate that we are clearly thinking about these things, recognizing that we may need to be alert to them.
They are not risks that we are unfamiliar with. They are risks that we manage and position ourselves to manage all of the time. In terms of global solids sourcing, we do operate on the global markets for some ingredients that we wish to put into some of our products, predominantly products that are headed for export markets. That includes sourcing from places like New Zealand, but the largest production growth in the globe as we stand here today is coming out of the U.S., and we do also source from the U.S., interestingly, as well as sell to the U.S.
Thank you very much, Mr. Chairman.
No worries.
Hi, Jillian King, shareholder. It has just been a fantastic presentation. It was really pleasing to read what I did read of the annual report. I have three very varied questions that have come from different perspectives. First is that it has been really good seeing all of the circularity and sustainability things online, in reports, and so on, and Bega's leadership in that. A lot of people are very, very happy about that, particularly in terms of minimizing waste and maximizing diversion by designing for recovery. One of the stories I tell a lot of people is that one, I think, was it last year or the year before, about redesigning the lids
Yes
at Bannister. I am just wondering why Bega is putting so much product, particularly yogurt, into pouches that cannot be recycled. I hear so many times, "What do I do with the pouch?" There are some people who recycle milk bottle lids, and now we can recycle the yogurt pouch lids through things like Lids for Kids. But the pouches, I do my best with my kids when they bring in the pouches to try and rinse it out and put it into soft plastics, but it is something I hear from so many people.
Yeah. Our fastest-growing segment is pouches. We also hear from consumers what they are requesting and what they require. I might get Pete to add in a moment, but the reality is convenience is an extraordinarily powerful consumer trend, and to not respond to that consumer trend would actually not see us able to stand here before you and say we market number one and number two brands. Our objective in circularity is always to try and maximize the use of the resource and try and make it as reusable as possible. We will continue to work on that with pouches, but I always think that it is dangerous to let perfection be the enemy of good. As I think we have answered on many occasions around sustainability, we continue to work on improvement in all areas.
But we won't do that at risk of not meeting a consumer demand, and that is an extraordinarily strong consumer demand. So whilst in the people that you may deal with, they might be concerned with pouches, as far as the market is concerned and equally as far as the competitive landscape that we work in to sell yogurt, we need to be in pouches. Pete, I don't know whether you've got anything to add to that.
Well.
Take the mic, Pete. I'll hand it to you.
Sorry. Barry, just to reiterate your comments around single-serve or convenience being a major driver of consumer decisions. We do have very good machines. They're very modern pouch machines. The packaging is actually formed and sealed as part of the process. We think that makes us closer to getting a better solution for recyclable packaging, and so we are monitoring that and keeping an eye on it. So because we've got three lines, they're technologically advanced. We think we are probably closer to a solution than many others on older format machines. Something we do review on a consistent basis.
Thank you. And one of my kids is one of your avid pouch buyers. One of the things that has occurred to me and to some of the people I'm speaking to is maybe there could be a little bit of a redesign of the pouch so that the hard plastic can come out.
I think we've got a lot of expertise in the areas that we work in.
Yeah, but it's-
I don't want to take up the time of the AGM by opining on how we can better manage some of the issues that we're very conscious that we're managing.
I'm trying to give you some feedback that I hear a lot.
No.
It is about the ability to rinse them out.
Can I just please ask that, I do not know whether you are noting or not, but at every AGM, your questions dominate the room, and I think we are very happy to answer them, but I do not want to enter into long-term discussions on them. So please move on.
Well, this is my third AGM in person, and I did not dominate last-
Please move on.
Okay. The second question is about nutrition, and we have heard a lot about that this morning. Certainly, I am one of them, I have been eating Bega Cheese all my life. Particularly about providing great-tasting nutrition products and clearly communicating the nutrition so people can make the choice. Last year was the first time I, as a result of coming to the AGM, tried the Greek yogurt in the pouch bit. I was really surprised at how much sugar was added to it. I see that that is now no longer the case, but given the consumer trends that we have heard about today, particularly around the health, I am just wondering why Bega is adding so much sugar to so many of its products, particularly the flavored yogurts, milk, and peanut butters.
I think we have got very strong strategies of, as you have noted, of reducing sugar and indeed even reducing salt, and we recently launched a salt-reduced Vegemite for kids. It is part of our strategy, but again, I would say we respond to a spectrum of consumers, and we offer them a spectrum of options, but part of our strategy is indeed to reduce sugar and reduce salt. Pete, again.
Our no added sugar range is actually growing exponentially, and we are pushing no added sugar offerings across more and more of our categories and product ranges. With a lot of our dairy products, the sugar you see is actually the natural sugar contained within milk. There are actually many of those products have no sugar in them, but there will still be a sugar claim on the back because milk itself contains natural sugars.
Yeah, I was just asking about the added sugar. Finally, it is around succession planning. Barry has been chair for 26 years or a huge driver of this and demonstrated your very deep personal alignment and guiding the company through corporate evolution. However, you like me, are not getting any younger and your attachment and your long tenure and so on is what Bega I am just wondering, it is unusual in the corporate world.
It is.
I am just wondering what Bega is doing to find and/or foster someone to eventually replace you in a way that will minimize disruption, be it in case of your sudden or hopefully planned departure.
I think as I look around the room, I will speak for myself, but like many of us in the room, some days I feel very young, and other days I feel a little older. I will probably answer that in two ways. Maybe I will answer it in a strange way. I have just arrived back from Portugal where I have completed a 650 km trek in 20 days. So I feel reasonably physically well, and I remain extraordinarily engaged and inspired to take Bega further forward. Having said that, the most important thing I do is to make sure that both from a board point of view and an executive point of view, there is a capable team around me, and there is no question through that entire 27 years and even prior to that, I would never wish to take credit for the success of this company alone.
This company has been successful because of the efforts of many. I think as you look at the size and the depth of the company, interestingly, its sheer size and scale and the sheer depth of capability that needs to be created to make it successful leaves me very confident that when the day comes, the company will be in very good hands from the perspective of a very highly qualified and credentialed board, which I of course, work closely with and always provide extraordinarily good counsel and a highly capable executive, which interestingly, on the one hand, and I think this philosophy is correct. On the one hand, we have people of great tenure that have great experience and great knowledge and, quite frankly, great calmness when this industry can throw up some pretty big challenges.
On the other hand, we have a relatively new executive team that bring new energy, new approach. As the business has transformed, we have transformed the executive team and indeed the board to match the needs of that business. I would love to say that the company absolutely needs me. But the truth is, I provide my stewardship, guidance, knowledge, and experience, because I still feel I have got something to contribute to the company. But I have got full confidence that if I am not here, there are a great many people in this room and beyond this room that will ensure the continued success at Bega. Perhaps importantly, as we talk about things like sustainability, the continued values and culture of the organization. But that breadth and depth is what is needed. That breadth and depth is why we are successful today.
It is not just the succession for me, it is why we are successful today. It is always having that eye to make sure we have got the right people with the right skills to continue to grow the business. So it can never be down to one individual. I think Pete and I like to hope that we make our contributions and have our influences and help set culture and help set audacious goals. But the execution of that is done by many. Thank you. Are there any other questions?
I have three online questions, Chairman.
Oh, thank you.
The first one from Michael Whelan. "Given the current balance sheet leverage, while much is made of the company's net debt position, how aggressive is the company planning to reduce gross debt levels, noting also the high level of intangibles on the balance sheet?
I think almost a similar question that was asked earlier. The reality is we're very comfortable with a very strong balance sheet at this time. History has shown that we are happy to push that balance sheet out if there is opportunity that further strengthens the company. But as mentioned earlier, much of our capital expenditure will come from cash flow that we generate. There's not a focus on needing to further reduce the balance sheet debt. It's historically low. And in terms of the intangibles, they're high-quality intangibles mostly associated with our brands.
Thank you. Next question's from shareholder Mark Tope. "Can you comment on the global outlook for exports in key markets, including the growth segment MPC and other protein segments, which seem to represent a major opportunity globally?
They do indeed. It's interesting talking about how you need to be ready for change. Milk protein, milk protein concentrates. What used to be a challenge in our business in skim milk powder are now the higher value we can make those milk proteins, either as an ingredient or indeed as a call-out on our products, the greater consumer response to it is, either from consumers themselves or from customers who require those ingredients. Milk protein, milk protein concentrates, we would recognize it as a huge opportunity. We would see that it will be sustained for some period of time. Interestingly, Pete and I have just come back from the U.S. where, and this may be interesting to the number of people in this room, cheese and butter have almost become the by-product for the whey powder and the proteins.
We're seeing factories built in the U.S. to make cheese. We're actually seeing cheese fairly challenged around the world in terms of pricing. They're making the cheese to create the whey powder to get the whey proteins, and it's an entire flip of what we've seen that a product like cheese is almost a by-product to whey. If you go back to when I first joined Bega, that whey used to be sprayed out on paddocks as a waste product, which actually does demonstrate the benefits of a circular economy. Pete, I don't know whether you've got anything to add to that.
A significant opportunity that we continue to try and the company has a history of extracting value from protein through being an early adopter of lactoferrin. What I would say is there's more and more opportunities now to fractionate protein further into higher value streams. We are very focused on that over the next couple of years.
One final question from shareholder Steven Main. "After a series of controversies, our long-term corporate advisor, David Williams, quit as Chair of ASX-listed PolyNovo last October. What is our history with Mr. Williams, and is he currently advising the company? The Kidder Williams website quotes our Chair, Barry Irvin, saying, 'Kidder Williams will work all hours of the day and night to make sure their clients are successful.' Did the PolyNovo situation cause any review of this relationship?
The relationship with Kidder Williams is deep and goes back to almost beyond my tenure. David Williams has been a key part of the strategic development of Bega, particularly in the area of mergers and acquisitions, and indeed in the floating of the company. Tim Faulkner, the CEO of Kidder Williams, is our primary advisor. Tim has worked with us for 20 years. He and his team provide extraordinary value to Bega. We note some of the publicity and press around David. However, our relationship fundamentally has its foundations with a team led by Tim, that continues to advise us very capably and positions us very well as we think about mergers and acquisitions and other strategic opportunities.
No further questions.
Are there any further questions? If that wasn't formal enough, ladies and gentlemen, we now come to the formal part of the meeting. So if we go onto slide 25, and voting proceeds. A poll is being held on all resolutions at this meeting. If leaving early, place completed voting cards in the ballot box by the registration desk. For each item of business, I will first open the floor for discussion, and then we will put the motion for that item to the meeting and ask you to complete your voting cards in relation to that item. Chair Registrar Regi Harbron of MUFG Corporate Markets Limited will act as returning officer in relation to the poll. If there are any aspects regarding voting that you are uncertain about, please ask one of our registrar staff.
The result of the poll will not be available before the end of the meeting. You can however, obtain the results of the poll later today by visiting Bega Group website or the ASX. We have resolutions relating to the adoption of the remuneration report for the year ended 30 June 2026, election of Directors, and amendment to the company's constitution. I will go to slide 27 firstly, the adoption of the remuneration report.
Firstly, to item two in the notice of meeting, the remuneration report on pages 40 - 55 of the annual report outlining the remuneration for the Board, Executive CEO, and other personnel. In setting remuneration, the Nomination, Remuneration, People and Capability Committee refer to market and external advisors. I would inform the meeting that the following proxies have been received in respect to the remuneration report. I will be casting the undirected proxies in favor of the motion. Are there any questions regarding the remuneration report?
One question, Chairman, from Steven Main. It sort of relates to two resolutions, but I will read it all out. Thank you for disclosing the proxies to the ASX. Which proxy advisors triggered the 31.4% remuneration report strike and the 11% vote against the re-election of Peter Margin? Does the Executive Chair believe there is any merit in their arguments, and are we planning any changes as a result of these votes?
Brett, you are probably in a better position to name the proxy advisors than I am in terms of the ones that recommended against.
Their reports are confidential.
Right.
I would say a number of them did vote against. Some voted for. And obviously, we have spoken to a number of the shareholders whom we were aware that voted in advance of the meeting and explained the reasons behind that.
Okay. So I'll take it from there. Firstly, we're very pleased as usual with the very strong support we've received from our existing shareholders for all our resolutions. We do take into account all feedback. We will take into account the feedback from the proxy holders. But as I said, when considering them, we consider all feedback inclusive of the feedback from shareholders that have voted strongly in favor of both the election of Peter and supported the remuneration report. But we will take feedback into consideration as we move forward.
No further questions.
Okay. I've lost my place. As there are no further questions, I now move that remuneration report for the period ended 30th of June 2026 be adopted. I will now put the motion to the meeting. Would you please now complete your yellow voting card in relation to item two? Slide 28, the re-election of Peter Margin. I now move to the re-election of Peter Margin. Peter, I invite you to say a few words. Do you want a mic or do you want to come here?
Good morning, ladies and gentlemen, and great to see so many familiar faces. As shareholders who know me, and I've been around for a little while, my background is principally around food, agriculture, beverages. I've spent all of my working life in that sector. In terms of the Bega story, I first joined the Bega board in 2011, and I came on as the sole independent director at that time just prior to the flow to the business. It's interesting just to reflect on where Bega was at that point in time and fast-forward to today. In 2011, Bega had an enterprise value not long after floating of around AUD 350 million, and revenue of about AUD 930 million. Today, all those years later, we're looking at an enterprise value of over AUD 2.1 billion and revenue of about AUD 3.8 billion.
At the same time, the milk pool that Bega is responsible for has increased from about 140 million liters to today, where it is 1.4 billion liters. You can imagine the economic benefit that Bega is providing to not only regional areas but to Australia. I feel very privileged to be part of that journey, and that journey to establish Bega as, I think, the preeminent food company in this country. I think, the board and management over that journey have done an extraordinary job, and as I mentioned earlier, I feel very privileged to be part of it. I feel privileged that shareholders along the way have supported me. I've still got a little bit left in the tank, I'd like to think, to take Bega beyond the next horizon and really think about what this company can become in years to come. Thank you, Barry.
Thank you, Peter, and I'd like to add my commentary that Peter has been an outstanding director for an extended period of time, and I guess in relation to that earlier question, has been by my side in times both good and bad, and always provided exceptionally good counsel, both to me and to the executive team, and all the advisors that we have, making sure that Bega is successful. Before we proceed, I would like to inform the meeting we have the following proxies in respect to Peter's re-election. I will be casting the undirected proxies in favor of the motion. Are there any questions in relation to Peter's re-election?
Yes, Chairman. Peter might have to come up to the stage again. From shareholder Steven Main, once again: Is Peter intending to serve a full three-year term, and is this likely to be his final term on the board? What does he believe are the two best decisions Bega has made during his term on the board?
Great question, Steven. Firstly, yes, I intend to serve out the three-year term. Whether that will be my last term or not will depend on, I think, my state of health, but more importantly, listening to our shareholders to see what they think in terms of what is required as we look forward.
In terms of the couple of big decisions, and I will probably extend it to three, I think the first one was the acquisition that the company made of Tatura in around 2012, which certainly scaled up the organization but gave Bega great capability, particularly in infant nutrition and some of the milk protein component management that we have been able to get our hands around over the journey. The second big decision that I think is worth commenting on is the National Foods acquisition, and that has shot the lights out for us. It was a great acquisition.
It leveraged the capability that the Bega team had and could leverage that capability into building what I think is now an extraordinary company. The third area I think is setting, I am not sure if you call it decisions, but setting the culture for what this organization. If you look at the history of food companies across Australia, and there is very few that are locally owned anymore, most of them break down because of poor culture. If you look at the culture that has been developed over an extended period of time, it is quite unique. I think it has encouraged an openness and a frankness with the management team, and I think our focus has always been upon looking to attract the best quality people, providing an environment and a culture where they can excel.
I think what you have under Peter's stewardship today is something quite extraordinary and I think coming back to Steven's point, they would be the three big calls that we have been able to make over the journey.
Thank you, Peter. Are there any other questions? As there are no further questions, I now move that Peter Margin be re-elected to the board. I will now put the motion to the meeting. If you have not already done so, please record your vote in relation to resolution three. I now move to slide 29, the re-election of Terry O'Brien. Terry, I invite you to say a few words.
There we go. Well, good morning, everyone. It is a great pleasure to address the shareholders of Bega Cheese Limited to request the honor of representing you for a further three-year term on the board of directors. I cannot claim the same depth of history as Mr. Margin, but I did join the company as an Independent Director straight from my CEO role at Simplot Australia in 2017.
So this will be asking you to sign me up for a fourth term. From a purely selfish point of view, I love being on this talented and energetic board. It invigorates me, challenges me, and allows me to apply my mind and experience at every turn. From your perspective, the shareholders, I hope you are enjoying the returns from your investment in Bega Cheese. But more than that, enjoy being a shareholder in an Australian company that has its roots here in Bega.
An Australian company that right now is kicking goals against the flow of play. With many companies contracting and others moving out of the Australian jurisdiction, you are part of a company which is growing and flourishing, but most of all has its sights set on bigger things. It is because of this that I ask you to allow me to be part of this experience for a further three years, to be part of this excellent board, and to work with our outstanding CEO and his talented executive team, and to join them and assist them to maintain the momentum which has steadily built over recent years. Thank you.
Thank you, Terry, and thank you for all the value and counsel you bring to the board. Before we proceed, I would like to inform the meeting we have the following proxies in respect to Terry O'Brien's re-election. I will be casting the undirected proxies in favor of the motion. Are there any questions?
No, Chairman.
Sorry. Look, I was just anticipating. Sorry, are there any questions from the floor? As there are no questions, I will now move that Terry O'Brien be elected to the board. I will now put the motion to the meeting. If you haven't already done so, please record your vote in relation to resolution three. No, 3B, sorry. I'll now move to slide 30, amendment to the company constitution, insertion of proportional takeover provisions. To consider and if thought fit, to pass the following as a special resolution.
That, in accordance with Section 136 (2) of the Corporations Act 2001, the amendment to the company's constitution to insert proportional takeover provisions as described in the explanatory notes accompanying this notice of meeting be approved with the effect from the end of this meeting. I would inform the meeting that the following proxies have been received in respect to the amendment. I'll be casting the undirected proxies in favor of the motion. Are there any questions regarding the motion?
No, Chairman.
As there are no questions, I will now move that the amendments to the Constitution be adopted. I would now put the motion to the meeting. Would you please now complete your yellow voting card in relation to item four? Ladies and gentlemen, thank you very much for your attendance at this year's AGM. If all votes have been completed, please ensure you lodge your yellow voting cards in the ballot box stationed at the registration desk to ensure your votes are counted. The poll will remain open for a further five minutes. Voting outcomes of today's resolutions will be announced to the ASX and published on the investor page of the Bega Group website later on today. I now declare the meeting closed. Ladies and gentlemen, thank you very much for joining us.
We are in the home of the company, Bega, and as a country boy, it's always appropriate that we join each other for a cup of tea after the meeting. Please stay around and join us to have a cup of tea with us. Equally, my EA, Faith, is waving things at me, so there is a little product pack up there for all attendees. Please feel free to take them home. If you see spare ones, please take them as well. We won't count them at the door. We'll be delighted for you to share them with family and friends. Thank you very much. Thank you.