Ridley Corporation believes confidence is returning to the dairy industry after difficult trading conditions in the sector dented the animal feed supplier's core first-half earnings.
Ridley on Tuesday reported a 37 per cent lift in net profit for the six months to December 31 to $14.1 million.
But earnings before interest and tax from Ridley's core agriproducts business fell 17 per cent to $22.9 million, reflecting tough trading conditions in the dairy, aquafeed and supplements sectors.
Ridley's earnings from the dairy sector were at an all-time high in the corresponding period a year ago, but volumes were down 32,000 tonnes in the first half of 2016/17.
Consequently, manufacturing costs per tonne were affected by the underutilisation of dairy feedmill capacity.
The aquafeed business was hit by the stress on salmon caused by warm water, El Nino and oxygenation issues in Tasmania's Macquarie Harbour.
The absence of a dry season in northern Australia adversely affected demand for dry season supplements.
But Ridley said there are signs of confidence returning to the dairy sector as improved milk prices, low raw material prices and abundant forage combine to improve prospects for the coming six months.
"There are positive signs of recovery in the dairy and aquafeed sectors where we have endured a tough six months," Ridley managing director Tim Hart said in a statement.
"Confidence appears to be returning to the dairy sector, with small but steady uplifts in milk pricing, low raw material prices and abundant forage all combining to improve sentiment and prospects for the coming six months.
"Replacing the Huon (salmon) volume is a longer-term proposition, however we are working on a number of initiatives to improve second-half performance."
Shares in Ridley were 4.5 cents, or 3.44 per cent, lower at $1.265 at 1038 AEDT.
STRESS ON RIDLEY EARNINGS
* First-half net profit up 37pct to $14.1m
* Core earnings down 17pct to $22.9m
* Revenue down 11pct to $422.5m
* Interim dividend flat at 1.5 cents, fully franked
