Warrnambool Cheese And Butter Factory (wcb) Reports Record Sales And Profit In 2008

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25th August 2008, 11:21am - Views: 497
Warrnambool Cheese and Butter Factory Company Holdings Limited (ASX: WCB) today announced record financial results for the year ending 30 June 2008. WCB generated sales of $525 million in 2008, an increase of 41% over last years' result of $372 million. Net operating profit after tax for 2008 was $24.5 million, an all time record and a 155% increase over 2007.

"This result demonstrates the excellent positioning of WCB in the international dairy markets," said WCB's CEO and Managing Director Neil Kearney. "We processed a record volume of milk in 2008 and this has supported a very pleasing financial result."

WCB's commitment to working with our milk suppliers enabled total milk intake to grow by 6% to 853 million litres in 2008. In an environment of generally tightening Australian milk production, WCB's relationships and strong financial performance in 2008 allowed it to increase volume and continue to pay higher than average industry milk prices.

"Strong international soft commodity prices have enabled WCB to continue its policy of paying highly competitive prices to suppliers," Mr Kearney said. "The company's proactive approach to milk pricing has seen our milk intake grow while overall milk production dropped in the regions in which we operate".

WCB's increased milk volume allowed it to increase production by 3.2% over 2007. Operational flexibility at WCB's plant allows it to optimise production across a suite of products including cheese, skim milk powder, butter, cream, whey protein concentrate and fresh milk. This production flexibility has allowed WCB to manage its plant utilisation to generate higher product recoveries and optimise the product mix and associated profitability.

Earnings per share for the period were 62.5 cents, an increase of more than 150% over 2007.Net Tangible Asset backing increased by 20% to $3.11 per share.

The directors have declared a fully franked final dividend of 11.00 cents per ordinary share.Recognising the strong results this year, an additional fully franked special (further interim) dividend of 16.00 cents per share has also been declared. In conjunction with the 4 cents per share interim dividend paid in March 2008, this brings the total dividend for the year to 31.00 cents per share.

David Karpin, Chairman of WCB, said "WCB's philosophy is to appropriately share value between our suppliers and shareholders. This has been demonstrated by rewarding shareholders with a record level of dividends at a time when WCB is also paying our suppliers record high milk prices."

Current initiatives
Throughout 2008, WCB has actively pursued new higher-value markets and strengthened its current position through marketing and innovation. This has been supplemented through WCB's current and proposed joint ventures and alliances.

In 2007, WCB formed the "Great Ocean Ingredients" joint venture with Royal Friesland Foods. This 50:50 business will manufacture and market the nutritional pre-biotic ingredient Vivinal Gos. The associated manufacturing plant is now well into the construction phase with completion and commissioning on schedule and on budget for production early in calendar 2009.

In June, WCB and National Foods (NF) announced that should NF be successful in acquiring Australian Co-Operative Foods Limited (Dairy Farmers), NF and WCB would form a joint venture to own and operate the Dairy Farmers cheese business. Should NF be successful, WCB would obtain a 50% interest in one of Australia's largest branded dairy cheese businesses. WCB will update the market on developments as soon as practicable.

As part of our value add strategy and to improve and enhance customer relationships, sales and margins in the highly sophisticated Japanese market, WCB has formed a joint venture sales and distribution company based in Tokyo. Operations will commence in the fourth quarter of the 2008 calendar year following completion of financial documentation.

WCB has completed several continuous improvement programs over the past few years. These have been supplemented by organic initiatives and acquisitions opportunities designed to grow and diversify the business. These strategies are now demonstrating real and sustainable benefits for the company.

"WCB is well placed to take full advantage of its position in one of Australia's premier milk producing regions," said Mr Kearney. "Changes in world dairy commodity prices will continue to impact the business from year-to-year. However, favourable conditions are expected to continue in 2009. The initiatives underway at WCB will increase the scale and diversity of the business. This is likely to lead to a sustainable increase in WCB's underlying business and financial performance from that achieved historically."


For Investors:
Neil Kearney
CEO and Managing Director
Mobile: 0471 496 737
Office: 03 5536 2161

For Media:
Tricia Kent
Hadsel Grace
0418 585 154
03 9639 2450

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