Thursday, 27 September 2012 15:48

Co-op revamps ailing Oz business

Written by 

Fonterra is considering consolidating brands to arrest a decline in its Australian business.

The co-op's ANZ business, which includes consumer products in Australia and New Zealand, was the worst performer during the financial year ending July 31 2012. Normalised earnings dropped 20% to $204 million.

While earnings in New Zealand were slightly up, Australia suffered as a result of a downturn in consumer spending and aggressive competition. Fonterra also spent more on trade and promotions to maintain its market share in Australia.

Fonterra chief executive Theo Spierings says the result is "not satisfactory". "A plan has been approved by the board to improve our portfolio mix. It has to be aligned with increasing profitability and maximising cash flow."


However, Spierings says a $200m surplus is a good result given the challenging trading conditions in Australia. In 2010-11, the ANZ business earned $256m. He says the food service and ingredients businesses performed well.

The ANZ business represents fast moving consumer goods in the two countries, exports to Pacific Islands, ingredients, milk collection and manufacturing in Australia and food service sales.

In Australia, Fonterra's cheese, yoghurts, flavoured milk and dairy desserts face strong competition from other major processors: Lion (which owns National Foods) and Dairy Farmers, Murray Goulburn and Warrnambool Butter and Cheese.

Fonterra Shareholders Council chairman Ian Brown says it's disappointing the ANZ business once again failed to deliver a healthy return. "Unfortunately ANZ has not delivered to target. We are aware that market conditions are particularly tough at present and understand plans are in place to ensure the business improves."

Brown says it is encouraging to see the Latin America and Asia/Middle East business units delivered a good result at a local level. In Asia/Africa, Middle East (Asia/AME) region, normalised earnings increasing 1% to $194m.

Spierings says in constant currency terms, Asia/AME achieved an increase in normalised earnings of 8%. Sales volumes increased by 3% contributing to revenue growth of $62 million, with strong performance in Sri Lanka, Vietnam Hong Kong, Philippines and Malaysia contributing to this result.

Spierings says the "three As" - Anmum, Anlene and Anchor/Fernleaf, all achieved revenue growth, with Anlene now the established market leader in over 10 countries across Asia, and the Middle East.

In Latin America, normalised earnings increased by 16% on a constant currency basis.

Spierings says sales volumes increased by 2%, driving a constant-currency increase in revenue of 4%, with growth achieved in milk powder and beverages.

"Improved product mix, along with product innovation and higher volumes in higher margin products such as mature cheese contributed to the result."

More like this

Winston Peters questions Fonterra divestment plan

Foreign Affairs Minister Winston Peters has joined the debate around the proposed sale of Fonterra’s consumer and related businesses, demanding answers from the co-operative around its milk supply deal with the buyer, Lactalis.

Editorial: A new era for two co-ops

OPINION: Farmer shareholders of two of New Zealand's largest co-operatives have an important decision to make this month and what they decide could change the landscape of the dairy and meat sectors in New Zealand.

Should co-op sell its consumer brands?

OPINION: As CEO of the Dairy Board in the 1980s I was fortunate to work with a team of experienced and capable executives who made most of the brand investments that created the international consumer business Fonterra inherited. Soprole in Chile was the largest, but there were more than 20 countries where consumer marketing companies were established and Anchor and other brands were successfully launched.

Featured

'One more push' to eliminate FE

Beef + Lamb New Zealand (B+LNZ) is calling on farmers from all regions to take part in the final season of the Sheep Poo Study aiming to build a clearer picture of how facial eczema (FE) affects farms across New Zealand.

Winston Peters questions Fonterra divestment plan

Foreign Affairs Minister Winston Peters has joined the debate around the proposed sale of Fonterra’s consumer and related businesses, demanding answers from the co-operative around its milk supply deal with the buyer, Lactalis.

National

Machinery & Products

New McHale terra drive axle option

Well-known for its Fusion baler wrapper combination, Irish manufacturer McHale has launched an interesting option at the recent Irish Ploughing…

Amazone unveils flagship spreader

With the price of fertiliser still significantly higher than 2024, there is an increased onus on ensuring its spread accurately at…

» Latest Print Issues Online

Milking It

Tough times

OPINION: Dairy industry players are also falling by the wayside as the economic downturn bites around the country.

MSA triumph

OPINION: Methane Science Accord, a farmer-led organisation advocating for zero tax on ruminant methane, will be quietly celebrating its first…

» Connect with Dairy News

» eNewsletter

Subscribe to our weekly newsletter