Warrnambool Cheese and Butter says its full year outlook remains difficult after higher costs, the strong Australian dollar and subdued prices halved its first half profit.

"There has been some improvement in international market pricing, however the Australian dollar has remained relatively high largely offsetting price gains," chairman Frank Davis said in a statement

"In addition, ongoing competition in the raw milk market is likely to keep upward pressure on farm gate prices paid to milk suppliers."

The dairy processor on Thursday reported a $15.4 million fall in first half net profit to $15.3 million compared with the previous corresponding six months to December 31.

After elimination of half year inventory valuation adjustments, which have no effect on full year earnings, underlying operating net profit was $10.7 million, in line with the recent market update.

Warrnambool said the first half results were also affected by heightened competition among processors sourcing raw milk in the local market.

Given the reduced half year result and uncertainty around full year expectations, directors did not declare a half year dividend.