Dairy co-operative Murray Goulburn expects a recovery in dairy prices in the year ahead, which will deliver benefits to farmers.
Prices for cheddar cheese, butter, skim milk powder and whole milk powder have fallen 17.5 per cent since late May, Murray Goulburn says.
Managing director Gary Helou says prices have reached a low, and will recover in the coming months as America, Europe and New Zealand cut production.
“We think they have bottomed, and they will recover in the second quarter of FY16 right through to the fourth quarter of this year that we’re in,” he said.
Murray Goulburn expects to pay a farmgate milk price of $6.05 per kilogram of milk solids in the current financial year, but if market prices do not rise farmers may only receive $5.60 to $5.90.
Murray Goulburn paid $6.02 per kilogram to farmers in 2014/15, the third highest farmgate milk price it has ever paid to suppliers.
If the farmgate price reaches the company’s target, Murray Goulburn expects to post an annual net profit of $86 million in 2015/16.
But profit could be lower, in the range of $66 million to $79 million, if dairy commodity prices do not recover, it said.
The company made a net profit of $25.2 million in the year to June 30, down 10 per cent from a year ago.
After adjustments to reflect its new financial structure that allows access to a unit trust for non-farmer investors, profit was $73.3 million on a pro forma basis.
The group’s milk intake rose 5.5 per cent to 3.58 billion litres – about 38 per cent of Australia’s total supply.
Mr Helou said the weaker Australian dollar was helping to offset the impact of lower dairy prices, and the company was also shifting away from a reliance on dairy commodities to more profitable dairy products such as nutritional powders and ready-to-consume dairy foods.
Revenue in Murray Goulburn’s ready-to-consume dairy foods business, which makes fresh milk, UHT milk, cheese, butter and cream, rose 29 per cent to $1.13 billion in 2014/15.
Securities in Murray Goulburn’s unit trust were up 8.5 cents at $1.94.
LOW DAIRY PRICES WEIGH ON MURRAY GOULBURN
* Net profit down 10pct to $25.2m
* Revenue down 1.5pct to $2.87b
* Dividend for shareholders up one cent at nine cents
* No dividend for unitholders