What Would Synlait Be Worth to Fonterra or a2 Milk?
Speculation of a possible joint move by Fonterra and a2 Milk to buy Synlait raises a much bigger strategic question, says agribusiness expert Dr Nic Lees.
The co-op reported an increase in total group normalised earnings before interest and taxes (EBIT) - up 94% to $368 million.
Normalised profit after tax is also up 84% to $214 million and normalised earnings per share are 13 cents, compared with 7 cents at the same point last year.
The co-op also announced new earnings guidance: 50 – 70c/share, up from 45-60c.
However, its forecast farmgate milk price range drops from of $8.50 - $10/kgMS to $8.50 - $9.50/kgMS.
The new midpoint for the forecast milk prices $9/kgMS, a drop of 25c but the co-op’s is holding its advance rate.
Fonterra chief executive Miles Hurrell says the strong performance of its Ingredients channel reflects continued favourable margins in its protein portfolio, particularly for casein and caseinate products used in medical nutrition.
“The sustained strong margins in our protein portfolio give us the confidence to upgrade our earnings guidance, although the wider range reflects the volatility in the market which we expect to continue in the short to medium term.
“If these conditions continue for a further extended period, it could have an additional positive impact on forecast earnings.”
Performance in the co-op’s foodservice channel improved relative to the same period last year, but the high milk price is continuing to put significant pressure on margins in both the foodservice and consumer channels.
Hurrell says significant progress had been made on shipping the additional inventory held at financial year end.
“As planned, inventory volume has returned to normal levels. Lower milk collections at the start of the season have also contributed to the reduced inventory levels.”
