Asx Announcement - Market Update

ASX Announcement
Market Update

Warrnambool Cheese and Butter Factory Company Holdings Limited (ASX: WCB) advises that its business trading conditions have softened considerably. This is a primarily as a result of the unexpected and substantial reduction in world dairy prices over the past few weeks.

Since July 2008, 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%.

These commodity price reductions are off the back of the historic record high commodity prices experienced throughout the 2008 financial year. WCB also notes that a major Australian dairy manufacturer will be reducing the milk price paid to suppliers from 1 February 2009.

Outlook for 2009

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. WCB will update the market once it is reasonably able to ascertain the likely earnings impact.


WCB's financial results for the six months to 31 December 2008 will be released in late February 2009. Based on the depreciation in the Australian dollar and reduction in commodity prices, this is now likely to include a mark-to-market adjustment for outstanding foreign exchange contracts and a write down of inventory to net realisable value. The quantification of these items will be notified in conjunction with WCB's half year financial results.

Dairy Farmers cheese joint venture with National Foods

Formal agreements in relation to the 50: 50 JV with National Foods are expected to be finalised in late December 2008. Comprehensive details will be provided during the first quarter of 2009, in conjunction with the proposed equity raising by WCB to partially fund the transaction.

Neil Kearney, CEO and Managing Director of WCB commented "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."

ENDS

For more information, please contact:
For Investors:
Neil Kearney
CEO and Managing Director
Office: 03 5565 3102

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

Source: Warrnambool Cheese and Butter Factory Company Holdings Limited