WARRNAMBOOL Cheese and Butter (WCB) says its upgraded earnings outlook for this season is a realistic forecast, borne out by earlier performances.
Chief executive David Lord, in a letter to shareholders on Wednesday, said the Allansford processor would roughly double its earnings before interest, tax, depreciation and amortisation (EBITDA) to the range of $47 million to $52 million — up from $25.5 million last financial year.
The letter was posted as Bega Cheese was sending out its offer to WCB shareholders, offering them 1.2 Bega shares plus $2 for each WCB share in an attempt to take over the company.
Mr Lord’s letter was aimed at discouraging shareholders from taking the offer on the basis that it does not reflect WCB’s value.
Mr Lord said the large jump in projected earnings had to be viewed in context.
“Last year was a very difficult year on many fronts. Earnings were down but other companies suffered the same impact,’’ he said.
“Measured by net profit margin we’re exactly the same as Murray Goulburn.”
Mr Lord said the forecast for this season could be more realistically compared to the 2011 fiscal year, when the company posted an EBITDA result of $43.5 million.
That result was on the back of high commodity prices and a dollar exchange rate that ranged from 85 to 108 US cents but averaged around parity across the season.
Global commodity prices have now climbed above the 2011 level and look like being sustained for some time, while the dollar exchange rate is below what it averaged during that year.
“The present trading conditions look a little better than that year,” Mr Lord said.
“We believe this is a better indicator of what can be achieved this year.”
The earnings forecast will be substantiated by an investigating accountant’s report plus additional information when WCB sends its formal recommendation on the offer to shareholders about the middle of this month.
WCB shares closed at $6.40 yesterday.
Bega shares reached $3.65 and closed the day at $3.64.