Why Fonterra accepted defeat in the dairy aisle
OPINION: Fonterra's sale of its consumer dairy business to Lactalis is a clear sign of the co-operative’s failure to compete in the branded consumer market.
Fonterra says it has received “a high volume of interest” from potential buyers for its consumer and associated businesses.
“It’s still early days in this process, and we commit to providing farmer shareholders, unit holders, our people and the market updated on new developments as they occur,’ says Fonterra chief executive Miles Hurrell.
“We are also progressing work on our updated strategy and expect to share further detail over the coming months,” says Mr Hurrell.
Earlier this month, the co-op announced plans to divest, either fully or partially, its consumer business that includes iconic brands like Anchor, Mainland, Kapiti and Perfect Italiano.
The consumer and associated businesses that are being put on the block - which include Fonterra Oceania and Fonterra Sri Lanka - collectively utilised approximately 15% of the co-op’s total milk solids and represented approximately 19% of Fonterra’s group operating earnings in the first half of the 2024 financial year.
Hurrell provided an update on the divestment plan during its third quarter result announcement this morning.
“Following our announcement earlier this month of a step-change in our strategic direction, we have received a high volume of interest from parties looking to be involved in the potential divestment of our Consumer and associated businesses,” he says.
Meanwhile Fonterra announced profit after tax from continuing operations of $1 billion, up $20 million from last year or equivalent to 61c per share.
This result is driven by continued strong earnings across all three of the co-op's product channels.
Hurrell says the co-op's Foodservice and Consumer channels had a strong third quarter with a lift in earnings compared to the same time last year.
“As a result of this performance, we have lifted our forecast FY24 continuing operations’ earnings range to 60-70 cents per share, up from 50-65 cents per share,” says Hurrell.
The co-op has retained its current season forecast Farmgate Milk Price midpoint at $7.80/kgMS while range has been narrowed to $7.70-$7.90/kgMS.
For the new season starting June 1, it has announced a forecast range of $7.25 to $8.25/kgMS, with a mid-point of $8/kgMS.
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