Russian trade sanctions and falling commodity prices are threatening to eat into profits at Bega Cheese.
The NSW-based cheesemaker is forecasting a fairly flat profit and revenue result for this financial year because of falling dairy commodity prices around the world.
Chairman Barry Irvin told shareholders at Bega's annual meeting that an over-supply of dairy products, production increases, and uncertainty surrounding Russia's trade sanctions had pushed prices down 45 per cent in the past six months.
As a result, Bega expects its normalised net profit for 2014/15 to be broadly in line with the $66 million it recorded last financial year.
Revenues are again expected to come in around $1 billion.
Mr Irvin said the price falls will offset improved returns from several business initiatives Bega has introduced in recent years.
Bega's shares closed steady at $5.13.
Russia banned food imports, including dairy, in August in retaliation to Western sanctions on the country over its support for rebels in eastern Ukraine.
The sanctions affected Russian imports of cheese, milk, dairy, meat, fruit, vegetables, fish and poultry from Australia, the European Union, United States, Canada and Norway.
Mr Irvin said the parts of Bega's business not exposed to commodity prices were growing and the company had a strong balance sheet to support expansion.
"Our view remains that there is strong underlying demand for dairy products, particularly in Asia, there is a long-term projected shortage of supply and Australia and, more specifically, Bega Cheese is well positioned to benefit from that demand," he said.
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