A slump in dairy prices has led Australia’s Warrnambool Cheese and Butter Factory (WCB) to admit today (19 December) that its full-year earnings will fall.

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WCB blamed an “unexpected and substantial” reduction in world dairy prices in recent weeks for the profit warning.


Since July, the company said, Australian dollar prices for all major traded dairy products have “declined materially”.


“Cheddar prices have fallen 35-40%, skim milk powder 40-45% and butter 35-40%,” WCB said in a statement to the Australian Stock Exchange.


“At this point in time, it is too early for WCB to definitively comment on the earnings impact of these recent developments. Collectively, they are likely to result in a decline in WCB’s 2009 earnings from the record levels achieved in 2008.”

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In the year to 30 June, net profit more than doubled to A$24.5m (US$16.7m).


CEO and MD Neil Kearney said: “Changes in world dairy prices will continue to impact our existing commodity business from year-to-year. However, the joint venture with National Foods and WCB’s other initiatives, such as Great Ocean Ingredients and WCB Japan, will increase the scale and diversity of our business. Together, these are likely to lead to a sustainable increase in WCB’s financial performance and decrease the historic volatility associated with our business.”


WCB said formal agreements linked to its cheese-making venture with National Foods are expected to be finalised later this month.


The company said it would release more details on the venture, and its planned equity raising that will partially fund the transaction, during the first quarter of next year.