UPDATE 1-Australia's Warrnambool doubles H1 profit amid China demand

Thu Feb 27, 2014 10:48pm EST

* EBITDA up 105 pct at $53 million

* Outlook for rest of year positive

* Demand from China underpinning growth

SYDNEY, Feb 28 (Reuters) - Australia's Warrnambool Cheese and Butter Factory Holdings Co reported a doubling in first-half profits on Friday, a step towards justifying the rich bidding war that left Canada's Saputo Inc owning almost 90 percent of the company.

Warrnambool said the outlook for the remainder of the year was positive with milk prices supported by strong international demand. The easing in the Australian dollar from its highs last year is also good news for the company.

"The improved market conditions experienced in the last quarter of FY2013 have continued into FY2014," said Chief Executive David Lord.

Warrnambool said earnings before interest, tax and depreciation and amortisation (EBITDA) in the six months to Dec. 31 was A$59.2 million ($53 million) amid strong international dairy demand and pricing, compared with A$29.3 million in the previous corresponding half.

The company's shares were up 1 percent at A$8.74. They have surged around 90 percent since mid-September when Bega Cheese Ltd kicked off the fiercest bidding war in Australia in years.

Saputo eventually beat out Bega and fellow Australian company Murray Goulburn Co-operative Co Ltd to claim majority ownership of Warrnambool in January.

It was prevented from gaining full ownership by Japanese beverage giant Kirin Holdings Co Ltd, which decided to retain its 10 percent stake. Kirin, through its local unit Lion, has an important cheese making and packaging partnership with Warrnambool.

The intensity of the struggle for Warrnambool - nine bids or counter-bids in total - reflected huge interest in Australia's agriculture assets amid surging demand from increasingly affluent Southeast Asia for both high-tech milk extracts and traditional dairy products.

Sales of dairy products in China are worth some $45 billion a year and are expected to grow rapidly through 2017 to about $89 billion, according to a Frost & Sullivan report.

Lord said that a decline in production in China had reduced their exports to the rest of the world amid a struggle to meet domestic demand.

"That's creating a supply side contraction ... and we expect to see that continuing for the rest of this year," he said.

Saputo currently has a sales office in China, and is selling dairy products into other Asian markets such as Japan, Taiwan and South Korea, out of its Argentina operations.

The Canadian company, largely focused so far on north America, said earlier this month it would consider further acquisitions in Australia as it reported third-quarter net profit of C$144.1 million ($129.8 million), compared with C$130 million a year earlier.

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