Solid third quarter result for Fonterra
Fonterra has announced an improved third quarter performance – with a profit after tax of $1.15 billion, up $119 million on the same period last year.
The business has started consulting workers at its Dunedin manufacturing plant, which it intends to shut down as farmer shareholders cut back fertiliser spend. The company is also looking at divesting either some or all its six lime extraction sites.
The co-op achieved sales volumes of 891,000 metric tonnes last financial year, down 0.4% compared to the previous year and significantly lower than 1.2 million tonnes achieved in the 2021-22 financial year. With lower demand, it has more manufacturing capacity than required across its three manufacturing capacity than required across its three manufacturing sites - Dunedin, Napier and Christchurch.
Ravensdown plans to shut down its manufacturing plant at Dunedin and continue operations as a port store and distribution centre only.
Diack says no decisions will be made until employee consultation is completed and any outcome is intended to be communicated by the end of September.
He told Rural News that the Dunedin site has 60 workers and about half would be impacted by the closure of the manufacturing plant.
Across its three manufacturing sites, Ravensdown has manufacturing capacity to produce 700,000 tonnes of fertilise - Napier 350,000t and Christchurch and Dunedin 180,000t each.
On the decision to close the Dunedin site, Diack says the co-op clearly needs manufacturing sites on both islands.
"It also came down to the fact how much further capital is required to maintain the site," he says.
"It must be noted that we will still be left with quite a large storage and distribution business in Dunedin."
On the lime extraction sites, Diack says the co-op is looking at a few options.
"Whether there's value in keeping in our hands or other people's hand. We might keep some and sell some."
Earlier this month, Ravensdown announced its annual results, with an operating surplus of $27.4 million before impairments for year ending May 31, 2024. After full year impairments the co-operative delivered a profit before tax of $4.8 million.
Diack says the co-operative worked hard to deliver competitive pricing throughout the year, with farmers spending 20% less than last year, and marginally less fertiliser sold. This was reflected in a revenue drop of $186 million, to $739 million.
"We have been deliberate in our intent to provide the best possible price for our customers in a year when their discretionary farm expenditure remains under pressure.
"Equally we have maintained a strong focus on the core strength of the business in terms of cashflow, value, and profitability to ensure a sound and sustainable service, and ongoing investment for our shareholders."
Positives were inventories at year-end reduced by $57 million to $150 million, debt reduced by 41% to $76 million, and relatively flat operating costs in a strong inflationary year.
For the second consecutive year, the co-op is not paying any rebate to farmer shareholders. But Diack points out that farmers regard rebates as distribution of excess funds in the business.
