Australian dairy firm Warrnambool Cheese and Butter Factory (WCB) has dismissed a takeover approach as under-valuing the company and insisted the business is recovering after a tumultuous year.

After 12 months in which WCB has issued a profit warning on the back of falling milk prices, seen its chairman resign, cancelled a rights issue and ended plans for a cheese venture with National Foods, the company said today (8 December) that it had received an "unsolicited and indicative" approach for the business.

In a statement to the Australian stock exchange, chairman Frank Davis said the WCB would not recommend the proposal to its shareholders.

"The indicative proposal is incomplete, non-binding and subject to a number of conditions," Davis said. "The board has informed the third party that the indicative proposal does not incorporate appropriate value to reflect the strong prospects of the company and it cannot be recommended to its shareholders in current form."

Reports in Australia have claimed that National Foods or milk processor Murray Goulburn could be behind the approach for WCB. Neither company could be reached for immediate comment.

Davis insisted the outlook for WCB was looking rosier with the business recovering all of the milk volumes it lost earlier in the year when it slashed prices - a move it subsequently reversed. Davis also said that global dairy prices had started to improve.

"Dairy business conditions have improved markedly, with global dairy prices recovering more than 50% in Australian dollar terms since August 2009," Davis said.