Fonterra trims board size
Fonterra’s board has been reduced to nine - comprising six farmer-elected and three appointed directors.
The strong balance sheet means Fonterra will be returning $88 million to farmer shareholders and unitholders in August, two months earlier than announced before. It also remains on track for a strong full-year dividend.
The co-operative made a profit after tax of $1.3 billion, equivalent to 81 cents per share, for the third quarte of FY23 - February to April this year.
This is up $854 million on the same period last year and includes the gain on sale from Soprole of $260 million. Excluding the net gain from divestments, Fonterra's normalised profit after tax improved on last year, up $606 million to $1.08b, equivalent to 65c/share.
Total revenue for the third quarter topped $19.7b, compared to $17b during the same period last financial year.
However, operating expenses rose by nearly $400m to $2b. Sales volumes topped 3 million metric tonnes, slightly better than the previous year.
The ingredients division was the star performer with normalised earnings risings 120% to $1.4b foodservice was also up with earnings around $300m but consumer business recorded a loss of $23m.
Fonterra says the ingredients sector's gross profit improved $922 million due to continuing favourable margins in protein and cheese portfolios, as well as higher sales volumes. Operating expenses up 16% reflected inflationary pressures and supply chain disruption.
Fonterra's consumer business was impacted by mostly lower sales volumes driven by Sri Lanka, as sales volume was limited while ability to access US dollars was constrained.
Fonterra chief executive Miles Hurrell attributes the solid result to strong performance in the ingredients channel, with continued higher margins in cheese and protein portfolios, particularly casein and caseinate.
"These favourable price relatives have continued longer than expected, and we're also seeing improved performance coming through in our foodservice and consumer channels, in global markets."
As a result, Fonterra lifted its full year forecast normalised earnings to 65-80c/share, from 55-75c/share.
Commenting on the co-op's long-term strategy, Hurrell says it has transitioned to its new flexible shareholding capital structure.
It has also completed the divestment of Soprole and finalised its exit of China Farms following the sale of the last remaining farm
"With the sale of Soprole now complete, we are bringing forward the payment date of our proposed capital return of around 50c/share and unit, from October 2023 to August 2023."
Implementation of the capital return, which is approximately $800 million, remains subject to a Scheme of Arrangement being voted on by shareholders, and approval by the High Court, which is a common process for this type of transaction.
The co-op is also taking steps towards its sustainability goals.
An announcement is expected on a scope 3, or on-farm emissions target, in the middle of the year.
"Meetings are underway with farmers where we're sharing more information on what a target will look like and how we can collectively achieve it," says Hurrell.
"It's also pleasing to see the Centre for Climate Action Joint Venture, of which Fonterra is a shareholder, is now operational.
"The JV has made its first investment, contributing $1.8 million to Ruminant BioTech, a New Zealand-based start-up that is developing a slow-release, biodegradable, methane-inhibiting bolus," says Hurrell.
