February 19, 2014

New South Wales-based Bega Cheese reported an 18% jump in first half profit to AUD18.7 million (US$17 million) and has hinted that dairy wars are not over, as the company is well-positioned for further consolidation and the battle for milk supply.

But Bega said it has reaped AUD98.9 million (US$89 million), before tax and costs, for its 18.8% stake in WCB and expects to report an after-tax profit of AUD44 million (US$40 million) in its full-year accounts.

"The recent battle for control of WCB was a demonstration of both the value of dairy assets in Australia and Bega Cheese's positioning as a key player in the ongoing rationalisation of the Australian dairy industry," Bega said.

The comment comes just days after the banker who led Saputo to victory in the AUD530 million (US$478 million) battle for Warrnambool said he expects dairy deals to keep flowing.

Announcing its first-half profit, Bega said there are a number of organic growth opportunities it intends to pursue in further value-adding its whey and dairy nutritionals products.

Adverse weather and competition for milk supply drove an 8% drop in milk intake to 336 million litres, but group revenue rose 4% to AUD510.6 million (US$461 million) and earnings before interest and tax jumped 15% to AUD30.2 million (US$27 million). Near-record dairy commodity prices and the recent decline in the Australian dollar underpinned the growth in earnings.

The company said a key focus going forward will be on providing incentives to grow its existing milk pool and procure new supply, suggesting it is ready for a battle to win farmers from rivals like new entrant Saputo.