Bega Cheese says Chinese consumers are increasing their dairy intake at the same time that milk production in China is declining, underpinning global prices.
"The outlook for dairy commodities continues to be positive, largely due to continuing strong demand from China for whole milk powders and whey powders," Bega said as it reported an 18 per cent rise in half year profit.
"Occurring concurrently is growth in demand for infant and adult nutritional dairy products as well as growth in the western-style bakery sector in Asian markets.
"These growth sectors are core investment and business platforms for the group."
Bega made a net profit of $18.7 million in the six months to the end of December, up from $15.9 million in the prior corresponding period.
Cost controls, including reduced distribution costs, contributed to the higher profit, it said.
Sales volumes in the first half of the financial year were lower, partly due to a decline in the intake of milk.
But revenue grew due to higher prices for commodities such as skim and whole milk powder, and a change in product mix.
Bega also said there had been strong demand for its product range, allowing it to increase selling prices.
The company said it expects to consider a number of investment and corporate opportunities in the short to medium term.
Bega was unsuccessful in the recent three-way takeover battle for Warrnambool Cheese and Butter Factory, eventually won by Canadian dairy giant Saputo.
Shares in Bega gained 20 cents to $5.35.
