Why Fonterra accepted defeat in the dairy aisle
OPINION: Fonterra's sale of its consumer dairy business to Lactalis is a clear sign of the co-operative’s failure to compete in the branded consumer market.
The final payout for last season includes a farmgate milk price of $8.40 and a dividend of 10c/share; a 100% share-backed farmer would get $8.50/kgMS.
Fonterra chairman John Wilson says that the cash payout to the cooperative's 10,500 farmer shareholders was the highest ever made since Fonterra's formation in 2001.
"The farmgate milk price on its own represents an injection of more than $13.3 billion to the New Zealand economy for the season," he says.
"It is a strong result, reflecting the determination of our farmer shareholders to lift on-farm performance, matched within the business by a focus on driving revenue."
Fonterra farmers took advantage of good conditions last season to produce 1,584 million kgMS, 8% more than last season, to make the most of the good prevailing prices early in the season.
North Island volumes were up 9% at 969 million kgMS, while the South Island delivered a 7% rise in volumes to 615 million kgMS.
A very good spring saw our farmer shareholders achieve record milk production through an extended peak, stretching our production capacity for powders, says Wilson.
"This led to early impacts on stream returns from the less valuable products we were forced to make."
Fonterra chief executive Theo Spierings says the c ooperative had come through a very demanding year.
"We have continued to stay on track with our strategy, focusing on securing the best returns to our farmer shareholders.
"We achieved record revenue of $22.3 billion for the year, a direct result of the focus on achieving the highest possible revenue line that is good for the farmgate milk price.
"Constrained margins in our foodservice and consumer businesses and on non-milk powder products were the knock-on effect, contributing to a 27% rise to $19.8 billion in the cost of goods sold. However, we maintained our focus on efficiency and achieved a 2% reduction of $46 million in our operating costs.
"Our higher cost of goods sold, along with higher interest and taxation, saw our net profit after tax decline by 76% to $179 million."
