Milk supply down but profits up
Tatura Milk doubled its aftertax profit in the first half of this financial year as a result of its nutritional and ingredients business.
Tatura Milk operates as a subsidiary of Bega Cheese which announced a half-year profit of $15.7 million.
Bega announced Tatura Milk had recorded a $12.5 million profit, compared to $5.5 million in the first half of the year.
This translates to a 128 per cent increase.
However, milk supply from suppliers decreased by about nine per cent to 179 million litres which the company blamed on abnormally wet seasonal conditions.
Bega Cheese revenue increased by 10.6 per cent to $621 million.
The company said growth in Bega Cheese’s own-brand business, an improvement in global dairy commodity prices and increased first-half sales in the nutritional business all contributed to the revenue and profit improvement.
Bega Cheese executive chairman Barry Irvin said the highly competitive environment and changes in markets and supply channels was something they were used to managing.
‘‘Our strategy has always been to have a balanced business which assists us in dealing with volatility in either the Australian or global market,’’ Mr Irvin said.
Bega entered into a promising partnership with noted health company Blackmores early last year, but that relationship is now under review.
The company has noted that domestic and international infant formula markets have experienced major disruption since April 2016, largely as a result of the Chinese authorities announcing changes to regulations relating to selling and marketing infant formula in China from January 2018.
‘‘The Bemore business was adversely impacted by this disruption in first half 2017,’’ the company stated, and that the situation was expected to continue into the second half of the financial year,’’ Mr Irvin said.
‘‘As a result, Bega Cheese and Blackmores are reviewing the operations of the Bemore partnership and the dynamics of the markets in which it operates.’’
He said the long-term downward trend in global dairy commodity prices was showing strong signs of correcting at the same time as the infant formula market had become more volatile.
While pleased with a strong first half result, Mr Irvin said he expected the second half to be more challenging.