New Zealand’s dairy giant Fonterra reported a half year Profit after Tax of NZ$729m in March, up 8% on the previous year.
A co-op owned by more than 11,000 New Zealand dairy farmers, Fonterra confirmed earnings of 44 cents per share, adding that it would be paying members an interim dividend of 22 cents per share, alongside a 2024/25 season forecast Farmgate Milk Price midpoint of $10.00 per kgMS.
“We’re focusing on driving value which includes delivering strong financial performance while achieving the highest sustainable Farmgate Milk Price,“ said CEO Miles Hurrell in a press release.
“At the same time, we’re looking ahead as we implement our strategy and continue to invest for the future. We have commenced projects to unlock manufacturing production capacity for our Ingredients and Foodservice channels, with site works under way at Studholme for high-value protein capacity and at Edendale for a new UHT cream plant.”
Hurrell confirmed the co-op’s plan to continue to invest in future-proofing operations and its supply chain network. This includes a new Whareroa coolstore and plans for decarbonisation projects at Clandeboye, Edendale, Edgecumbe and Whareroa to secure energy supply and reduce emissions.
“As we focus on delivering the strongest farmer offering, we have announced new funding for farmers with lower emissions milk and expanded the Fixed Milk Price programme that farmers can use to get more certainty around the Farmgate Milk Price,” Hurrell said.
The co-op is seeing “good demand” for its product, he added, after working to optimise its product portfolio to capture value from the market conditions. “We have also optimised the current season’s Advance Rate Schedule to get cash to farmers sooner, underpinned by our balance sheet strength.
“In terms of milk flows, our forecast milk collections for the year are up 2.7% on this time last year to 1,510 million kgMS. This follows favourable pasture growth across most of New Zealand earlier in the season, noting many parts of the country are currently experiencing very dry conditions.“
Hurrell attributed the performance to “an optimised product mix, designed to capture value across the co-op’s sales channels”.
“Our robust first half performance saw earnings growing alongside the strong Farmgate Milk Price, reflecting the strength of our core business,” he said.
Fonterra’s ingredients channel performed well, he added, with sales volume down 3.9% and operating profit up $229m to $696m, “reflecting better margins and improved product mix.”
“Our Foodservice channel has seen sales volume growth of 8.3% this half,“ he said, “with Q2 gross margins significantly up on Q1 as pricing adjusted to the higher milk price. Foodservice operating profit for the half was a healthy $230m, compared to the record high of $342m in FY24 when input costs were much lower.
“The Consumer channel saw good sales volumes, up 8.5%, and margin growth, despite the higher Farmgate Milk Price, with operating profit largely flat on prior period at $173m.”
Fonterra has also embarked on a six-year NZ $450-500m IT & Digital transformation project, which Hurrells said is “progressing well and remains on budget”.
He also expressed optimism regarding the co-op’s future. “The co-op is in a great shape, with milk collections, the forecast Farmgate Milk Price and earnings performance all up on this time last year,” he said. “As we look to the balance of the year ahead, we’re focused on maintaining this momentum in performance, while progressing delivery of our strategy, including the dual-track Consumer divestment process which is on track as planned.”
