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Bega Cheese doubles annual profit

AAP logoAAP 23/08/2016 Trevor Chappell

Dairy processor Bega Cheese says it's too early to say definitively if global dairy commodity prices are improving.

Low dairy commodity prices resulting from global oversupply have resulted in dairy processors reining in the price that they pay dairy farmers for their milk.

"There are some green shoots in the international market, and indeed there are many analysts reporting that the global commodity market will improve throughout 2017," Bega executive chairman Barry Irvin said on Wednesday.

"I would say that given some of the volatility that we've seen, it's too early to make a call on that."

Mr Irvin said current farmgate milk prices reflected the imbalance between supply and demand.

"We are starting to move back to a position where farmgate milk prices and global returns are more aligned," he said.

Bega on Wednesday reported a net profit of $28.8 million for the 12 months to June 30 - up 132 per cent on last year's $12.4 million.

Normalised profit, which excludes the impact of significant events, rose 33 per cent to $29.2 million.

Strong sales growth - especially in nutritional products such as infant formula - and cost cuts helped boost the bottom line despite oversupply in the broad market and strong competition.

"We expect continued revenue growth and improved financial performance in FY2017 (the 2017 financial year)," Mr Irvin said.

"Bega Cheese continues to maintain a strong balance sheet, and the company is well positioned to grow its business both organically and through acquisition."

Also, Bega announced that chief executive Aidan Coleman will retire in January 2017.

Bega Cheese produced 238,000 tonnes of dairy products in 2016 - up six per cent on last year.

Bega said that significant increases in global dairy production, softening demand in China, Russian sanctions on dairy imports from western countries, and a highly competitive Australian market had created a very challenging operating environment for dairy companies and farmers in 2016.

The challenging circumstances became tumultuous when two large dairy companies - Murray Goulburn and Fonterra - announced retrospective cuts to the price they pay dairy farmers for their milk.

But, said Mr Irvin, Bega's strategy of controlled investment in infrastructure and capacity had helped it withstand the volatility.

Shares in Bega closed 13 cents higher at $6.39 on Wednesday.

BEGA PROFIT JUMPS DESPITE TOUGH CONDITIONS

* Full-year profit up 132pct to $28.8m

* Revenue up 7.5pct to $1.2b.

* Final dividend up half a cent to 5.0 cents per share, fully franked

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