Fonterra Suppliers Confident in Mainland Dairy Future
Fonterra's 460 milk suppliers in Australia, who will switch to Lactalis end of this month, are unfazed with the impending change.
This will be welcomed by farmers, left angry and disappointed by two consecutive years of net losses caused by massive write downs of overseas assets.
Total group normalised earnings for the first six months of the 2020 financial year are up $272 million on last year to $584 million.
Fonterra chief executive Miles Hurrell says the co-op has delivered this through stable underlying earnings from Ingredients business, improving gross margins in Foodservice and reducing our operating expenses.
“Our Foodservice business has definitely been our stand-out performer in the first half as we’ve grown our sales to bakeries and coffee and tea houses across Greater China and Asia.”
The co-op has continued to reduce debt.
“We completed the sale of DFE Pharma and foodspring® in the first half of the year with cash proceeds of $624 million and this has helped reduce net debt by 22% or $1.6 billion, compared to this time last year,” says Hurrell.
He says the co-op has built on the work done in 2019 and has continued to reset its business, introducing a new strategy, reorganising and resizing its teams so there is greater focus on customers, and at the same time, significantly lifting its financial performance.
“We are now a very different co-op to this time last year – we’re prioritising New Zealand milk and staying focused on what we know we’re good at and what makes a difference to our farmer owners, unit holders, employees and communities.
“While there’s no doubt the world is experiencing an almost unprecedented situation and response to COVID-19, I’m pleased with the progress we’ve made so far against our four priorities for 2020.
“These are to hit our financial targets, reduce our environmental footprint, build a great team, and support regional New Zealand. By achieving these, we will take strides towards our long-term goals of Healthy People, Healthy Environment and Healthy Business.”
Fonterra’s key financial targets for 2020 are to meet its earnings guidance of 15-25 cents per share, achieve a gross margin in excess of $3 billion, reduce debt so it is no more than 3.75x its earnings and ensure capital expenditure is no more than $500 million.
Commenting on these targets, Hurrell says he is pleased with the progress and momentum Fonterra has achieved in the first six months of the financial year, but Fonterra is now operating in a very different global context as a result of COVID-19.
