The return of America's dairy farms to breakeven, and the prospect of profits for its pork farmers, has prompted Genus to forecast a recovery after a slide in interim profits.

The animal genetics group, which shocked investors in November by warning of a drop in profits in the July-to-December period, said that underlying pre-tax profits had come in 8.3% lower at £15.5m.

However, Richard Wood, the Genus chief executive, said that the group would deliver an improved performance" in the first six months of 2010, the last half of the company's fiscal year.

"Towards the end of [2010], early market indicators started to turn positive in the US," Genus said.

"Milk prices improved to break even for farmers and the futures market is predicting a return to profitability for porcine producers by the summer."

'Particularly sudden and deep'

The revival follows a particularly difficult half year in North America, amid what Genus called "the bottom of a deep global agricultural recession".

Sales in the region slumped by 16.2%, far faster than the 3.6% slide, to £134.9m, in revenues for the group as a whole.

Purchase of semen by US dairy farmers, whose downturn as "particularly sudden and deep", fell by 4%. In the pig sector, continued losses by farmers prompted "significantly lower sales of breeding animals".

And Genus, highlighting "acutely depressed conditions" in its markets, also revealed it had slowed plans for expansion in China and had restructured its German business following disappointing sales.

However, the European division overall, Genus's largest unit, reported a 19.2% rise to £11.8m in operating profits, on revenues up 3.4% at £61.7m, helped by a revival in milk prices and a healthy UK pig market.

Market reaction 

The results received were viewed as "resilient" by Panmure Gordon analyst Graham Jones, who edged forecasts for Genus earnings higher and restated a "buy" rating on its shares, with a price target of 740p.

"Genus has delivered first-half results slightly ahead of expectations, despite the very challenging end market conditions," he said.

At Evolution, analyst James Wheatcroft lifted from "reduce" to "hold" his rating on the stock, with a target of 650p.

Mr Wheatcroft said: "In the longer term, Genus is an ideal play on the need for increased agricultural yields.  In the medium term, investment in emerging market, such as China, will be a key earnings driver. 

"In the short term, end markets, especially North America, remain tough."

The stock closed down10p lower at 686p in London.