Australian dairy company, Warrnambool Cheese and Butter Factory Company Holdings Limited (WCB) says the remainder of the 2013 financial year is likely to be difficult, following higher than normal costs, subdued international market prices, and a strong Australian dollar in the first half of the year.The company announced that its profit for the first half of the year was $15.3 million, a reduction of $15.4 million compared to the same period last year.
Results for the first half of the 2013 financial year were adversely impacted by heightened competition amongst processors sourcing raw milk in the local market, resulting in a milk price to revenue ratio of 70.4% versus 63.0% for the previous corresponding period.
“As indicated in our November guidance, first half Financial Year 2013 earnings have been impacted by subdued international market prices, a strong Australian dollar and higher than normal raw milk costs,” said WCB’s Chairman Frank Davis.
The full year outlook remains difficult, says the company. There has been some improvement in international market pricing but the Australian dollar has remained relatively high, which has largely offset any price gains. In addition, ongoing competition in the raw milk market is likely to keep upward pressure on farm gate prices paid to milk suppliers.
Given the reduced half year result and uncertainty around full year expectations, Directors of WCB have not declared a half year dividend.
Meanwhile, consistent with the company’s strategy to build a portfolio of higher margin products, it will introduce new initiatives intended to see the company entering new markets. These include the development, on behalf of Kraft, of a premium low fat cheese that is four times lower in fat than other ‘light’ tasty cheeses, and a joint venture with New Zealand company, The Tatua Co-operative, to build a plant that produces lactoferrin, a key ingredient in infant formula.
Australian Food News notes that WCB’s results are in contrast to those released recently by the growing Bega Cheese group, which reported a half-yearly profit of $15.9 million. Australian Food News reported that Bega Cheese, despite increased farm gate prices for milk, said its positive results reflected improved volumes and new efficiencies from Bega Cheese’s own cheese-cutting and packaging technology investments.
