Tuesday, 26 March 2024 09:55

Fonterra posts solid results

Written by  Sudesh Kissun
Fonterra chief executive Miles Hurrell says earnings have been driven by higher margins and sales volumes. Fonterra chief executive Miles Hurrell says earnings have been driven by higher margins and sales volumes.

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.

More like this

Fonterra unveils divestment plan

Fonterra is exploring full or partial divestment options for its global Consumer business, as well as its integrated businesses Fonterra Oceania and Fonterra Sri Lanka.

Fonterra appoints new CFO

Fonterra has appointed a new chief financial officer, seven months after its last CFO’s shock resignation.


Viability of farming questioned

People are starting to question the viability of sheep and beef farming as profitability in that sector falls to one of its all-time lows, according to Federated Farmers board member and Gisborne sheep and beef farm, Toby Williams.

Zespri's net profit down $60m

Kiwifruit exporter and marketer Zespri has reported a $60 million drop in net profit, mainly driven by reduced licence revenue from lower pricing per hectare than 2022/23.

UAE FTA welcome news

The dairy and red meat sectors have welcomed news that New Zealand will begin formal negotiations for a free trade agreement (FTA) with the United Arab Emirates (UAE).

Home detention for animal neglect

A Taranaki dairy farmer received four-month home detention and was disqualified from overseeing of animals for 18 months over a lack of feed and welfare which led to some animals being euthanised.

Flock House and its secrets

Plans are in place to celebrate the 100th anniversary of the legendary Flock House opening its doors for the first time.


$160 billion cargo shipment deal

New Zealand’s major primary industry exporters have secured shipping capability to export $160 billion worth of products over the next…

Play by the rules

Trade and Agriculture Minister Todd McClay says the Government is always working to ensure that our food exporters are treated…

Machinery & Products

GPS in control

In a move that will make harvesting operations easier, particularly in odd-shaped paddocks, Kuhn has announced that GPS section control…

» Latest Print Issues Online

The Hound

True colours

OPINION: The watermelon party (AKA the Greens) try to portray themselves as an upright, self-righteous, caring bunch of woke, bicycle-riding…

Peace at last?

OPINION: Good news for hunters as Forest & Bird have "paused" legal action against the Fiordland Wapiti Foundation and agreed…

» Connect with Rural News

» eNewsletter

Subscribe to our weekly newsletter