Divestment means Fonterra can focus on its strengths
OPINION: Fonterra's board has certainly presented us, as shareholders, with a major issue to consider.
Fonterra has delivered a solid half-year result, thanks to higher margins and sales volumes across the co-op's diversified product and category mix.
For six months ending January 31, Fonterra's profit after tax rose to $674 million - up $128m on the same period last year. Earnings before income and tax (EBIT) reached nearly $1b, up 14% from last year.
The co-operative has declared an interim dividend of 15c, 5c more than last year and remains on track for a full-year dividend guidance of 50-65c/share.
With less than two months left in the 2023-24 season, Fonterra has narrowed its forecast farmgate milk price range to $7.50 - $8.10 per kgMS, with the mid-point remaining at $7.80/kgMS.
Chief executive Miles Hurrell says earnings have been driven by higher margins and sales volumes in foodservice and consumer channels. He says this has helped to offset lower returns in the ingredients channel following historically high price relatives last year.
Sales volumes are up 22kilo metric tonne (kMT) or 1.3% to 1,721kMT and gross margins are up from 16.6% to 18.4%.
"At the same time, our balance sheet position remains resilient, with our strong underlying performance and low debt position helping to further lower our financing costs this year.
"Operating expenses for continuing operations are up $52 million on last year after removing the impact of FY23 impairents, due to increased labour costs, professional fees and investment in IT infrastructure."
Consumer and foodservice earnings are also up year-on-year, due to improved pricing and higher sales volumes. Meanwhile, ingredient channel earnings are down year-on-year off the back of historically high price relativities in FY23 and lower margins in Australia Ingredients during FY24.
Global Markets' reported profit after tax is up $230 million to $380 million, due to lower input costs in Southeast Asia, Sri Lanka and Fonterra Brands New Zealand. Fonterra Australia's performance has been impacted by the higher Australian milk price.
In February, Fonterra announced plans to merge its Australia and Fonterra Brands New Zealand businesses from 1 May.
Greater China reported profit after tax is up $94 million to $232 million, primarily due to strong performance in the foodservice channel.
Hurrell says the outlook for dairy trade is positive.
He says a gradual re-balance of China domestic milk production and import demand has improved but remains volatile with a soft economy. At the same time there's increasing demand from key import regions, particularly Southeast Asia, and Middle East and Africa.
On the supply side, EU and US production remains stifled due to high on-farm costs, while New Zealand and Australia production has lifted mainly due to better weather conditions.
Meat co-operative, Alliance has met with a group of farmer shareholders, who oppose the sale of a controlling stake in the co-op to Irish company Dawn Meats.
Rollovers of quad bikes or ATVs towing calf milk trailers have typically prompted a Safety Alert from Safer Farms, the industry-led organisation dedicated to fostering a safer farming culture across New Zealand.
The Government has announced it has invested $8 million in lower methane dairy genetics research.
A group of Kiwi farmers are urging Alliance farmer-shareholders to vote against a deal that would see the red meat co-operative sell approximately $270 million in shares to Ireland's Dawn Meats.
In a few hundred words it's impossible to adequately describe the outstanding contribution that James Brendan Bolger made to New Zealand since he first entered politics in 1972.
Dawn Meats is set to increase its proposed investment in Alliance Group by up to $25 million following stronger than forecast year-end results by Alliance.
OPINION: Ageing lefty Chris Trotter reckons that the decision to delay recognition of Palestinian statehood is more than just a fit…
OPINION: A mate of yours truly recently met someone at a BBQ who works at a big consulting firm who spent…