Bega Cheese boss Barry Irvin says global dairy prices are finally recovering after a bruising 50 per slide that soured the company half year profit.
Profit dropped 68 per cent to $6.05 million in the six months to December 31 in the wake of lower prices and the cost of investments in Bega’s supply chain.
The cheese producer has cut its full year earnings guidance to between $25 million and $28 million, after previously forecasting a profit in line with the previous year’s earnings of $29.7 million.
Mr Irvin said 2014’s severe slump in dairy prices had gone on longer than the company expected, but there were signs of a turnaround.
“We had continued to expect some level of recovery in commodity prices, that has been very slow coming, but the reality is that we have now begun to see that recovery in February,” he said.
That improvement and the benefits of a lower Australian dollar were unlikely to provide much of a boost to the company’s full year result, Mr Irvin said.
“While we may see some benefit this year it’s really in 2016 that we can look forward to improved global commodity prices and an improved currency position,” he said.
The global dairy market was already facing oversupply issues before Russian trade sanctions helped to send them off a cliff, he added.
Mr Irvin praised Australia’s recent free trade agreement with China, which he said would benefit local dairy companies in the long term and make it easier to compete with New Zealand rivals.
“What the global industry and global food players are now identifying is that Australia is in a highly competitive position to service Asia,” he said.
“There is no longer the hesitation around whether it better to invest in Australia or New Zealand.”
New Zealand has had a free trade agreement with China since 2008.
Bega shares dropped 18 cents, or 3.4 per cent, to $5.05.
BEGA HIT BY MILK PRICE SLIDE
* Net profit down 68 pct to $6.05m
* Revenue up eight pct to $553m
* Interim dividend of four cents, unchanged