Expert Says Fonterra Backing Current Strategy With New CEO Appointment
The appointment of Richard Allen as Fonterra's new chief executive signals execution, not strategy, according to agribusiness expert Dr Nic Lees.
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.
