Australian dairy company Bonlac Foods has reported an operating profit after tax of A$34.2m (US$20.7m) for the half-year ended 31 December 2002.

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This was 43% down on the same period last year. Operating profit after taking into account asset sales was down 28% primarily due to weaker commodity prices. Net debt decreased by $22.9m during the half year.

Commenting on the results, Bonlac chairman Noel Campbell said that international prices for milk powder were at record lows at the beginning of the half year compared to the record highs in the previous corresponding six months.

“Although international powder prices improved by the end of December, our existing contracts and reduced milk flow due to the seasonal conditions hindered our ability to take advantage of the strengthening market,” Campbell said.

Commenting on the outlook for the second half of the year, Campbell said that the impact of the drought was expected to continue to put pressure on milk production, although higher international prices should help improve margins towards the end of the financial year. The strengthening of the Australian dollar should also reduce the expected loss for the year on the company’s hedge book.

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Bonlac said merger negotiations with Murray Goulburn are continuing and, subject to a satisfactory outcome from those negotiations, a proposal is expected to be put to shareholders prior to 30 June 2003.

In the meantime the company said it is continuing to focus on its core activities, reducing debt and lowering operating costs.