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Fonterra chief executive Miles Hurrell.
Fonterra has posted a strong first quarter results for this financial year.
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.”
OPINION: There is zero chance that someone who joined Fonterra as a lobbyist, then served as a general manager of Fonterra's nutrient management programme, and sat on the board of Export NZ, a division of lobbyist group Business New Zealand, doesn't understand that local butter (and milk and cheese) prices are set by the international commodity price.
Kiwis love their butter, and that's great because New Zealand produces some of the best butter in the world. But when the price of butter goes up, it's tough for some, particularly when many other grocery staples have also gone up and the heat goes on co-operative Fonterra, the country's main butter maker. Here the co-op explains why butter prices are so high right now.
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