Eroding share of milk worries Fonterra shareholders
Fonterra shareholders are concerned with a further decline in the co-op’s share of milk collected in New Zealand.
Fonterra has posted a solid half year result, with a net profit of $546 million, up $182m from last year.
The co-operative also upgraded its full year forecast normalised earnings from 50-70 cents per share to 55-75c/share and announced a proposed tax free capital return to farmer owners and unit holders of around 50c/share, subject to completion of the sale of its Chilean Soprole business.
Fonterra chief executive Miles Hurrell says the results for the first half of the year show the co-op is performing well, against a backdrop of ongoing market volatility.
“Our co-op’s scale and diversification across channels and markets has enabled us to navigate through disruption and make the most of favourable market conditions in a number of areas.
“While milk powder prices have softened recently, impacting our forecast Farmgate Milk Price range, protein prices have been high, and this is reflected in the lift in earnings we’re reporting today.
“Our improved earnings and strong balance sheet have enabled us to pay an interim dividend of 10 cents per share which is positive news for our farmer owners and unit holders. We also expect to be able to pay a strong full year dividend, in addition to our proposed capital return.
“The outlook for high quality sustainable New Zealand dairy remains positive. We have a clear strategy and are well-positioned to take advantage of this demand,” says Hurrell.
Fonterra’s Return on Capital for the last 12 months topped 8.6%, up from 6.1% in the comparable period.
“This lift in earnings is thanks to our co-op’s scale and ability to move our farmer owners’ milk into products and markets where we’re seeing favourable prices,” says Hurrell.
“With whole milk powder prices down, we moved more milk into skim milk powder and cream products to optimise our Farmgate Milk Price.
“We also made the most of favourable margins in our cheese and protein portfolios, by moving a higher proportion of current season milk into these products which has benefited our earnings.
“Our ability to capture these higher margins is reflected in our Ingredients channel performance, with normalised EBIT up $494 million, or 118%, on the same time last year to $911 million.”
The 2022-23 farmgate milk price range of $8.20 to $8.80/kgMS has been retained.
Fonterra shareholders are concerned with a further decline in the co-op’s share of milk collected in New Zealand.
A governance group has been formed, following extensive sector consultation, to implement the recommendations from the Industry Working Group's (IWG) final report and is said to be forming a 'road map' for improving New Zealand's animal genetic gain system.
Free workshops focused on managing risk in sharefarming got underway last week.
Annual farmer gathering, the South Island Dairy Event (SIDE), is set to make history as it heads to Timaru for the first time.
Installing 400 solar panels at their Taranaki piggery and cropping operation will have significant environmental, financial and animal welfare benefits for the Stanley family.
WoolWorks, New Zealand’s largest wool-scouring company, has partnered with the Lions Club of Riverton to help raise money for much-needed repairs to the Southland town’s swimming pool.
OPINION: Fonterra may have sold its dairy farms in China but the appetite for collaboration with the country remains strong.
OPINION: The Listener's latest piece on winter grazing among Southland dairy farmers leaves much to be desired.