Fonterra Co-operative Group’s interim FY23 results revealed a 50 per cent increase in profit after tax to NZ$546 million. The co-op also announced an earnings per share of 33 cents, a decision to pay an interim dividend of 10 cents per share, as well as upgrading its full year forecast earnings.
Snapshot
- Profit After Tax: NZ$546 million, up 50%
- Earnings per share: 33 cents per share
- Interim Dividend: 10 cents per share
- Return on Capital: 8.6%, up from 6.1%
- Forecast milk collections: 1,465 million kgMS, down 1%
- Forecast Farmgate Milk Price range: NZ$8.20 - $8.80 per kgMS
- Proposed capital return: approximately 50 cents per share and unit; and
- Upgraded full year forecast normalised earnings from 50-70 cents per share to 55-75 cents per share.
Fonterra CEO Miles Hurrell says the results for the first half of the year show the Co-op is performing well, with profit up 50 per cent, against a backdrop of ongoing market volatility.
“Our Co-op’s scale and diversification across channels and markets has enabled us to navigate through disruption and make the most of favourable market conditions in a number of areas.
“While milk powder prices have softened recently, impacting our forecast Farmgate Milk Price range, protein prices have been high, and this is reflected in the lift in earnings we’re reporting today,” Hurrell said.
The co-op also upgraded its full year forecast normalised earnings from 50-70 cents per share to 55-75 cents per share and announced a proposed tax-free capital return to farmer owners and unit holders of around 50 cents per share, subject to completion of the sale of its Chilean Soprole business.
Hurrell said the earnings lift was because of the co-op’s scale and ability to move milk into products and markets where there are favourable prices.
“With whole milk powder prices down, we moved more milk into skim milk powder and cream products to optimise our Farmgate Milk Price.
“We also made the most of favourable margins in our cheese and protein portfolios, by moving a higher proportion of current season milk into these products which has benefited our earnings.
“Our ability to capture these higher margins is reflected in our Ingredients channel performance, with normalised EBIT up $494 million, or 118 per cent, on the same time last year to $911 million,” he said.
Meanwhile, it has downgraded the valuation of its Fonterra Brands New Zealand business, which has been under margin pressure and not improving quickly enough.
Its Asian consumer brands have also been impacted by a weakening currency, higher interest rates, and a declining environment in some South-East Asian markets, the co-op said.
“For these reasons, we have revised down the valuation of FBNZ by $92 million and our Asia consumer brands Anlene, Chesdale and Anmum by $70 million.
“As a result of market conditions and the impact of impairments, our overall Consumer channel normalised EBIT is down $177 million to a loss of $94 million,” Hurrell said.
On a sustainability front, the co-op is working with farmers to drive on-farm change by investing in R&D and new emissions reducing technologies.
“We currently have 18 methane reduction projects underway and 30 active trials of potential solutions. This includes a new private-public partnership joint venture announced in November through which government and partners from across the food and fibre sectors will work together to reduce methane emissions.
“We’re also making progress in our work to transition our manufacturing sites out of coal by 2037. At our Waitoa site we’re converting one of our boilers to wood biomass. Scheduled to be operating later this year, the new boiler will reduce the site’s annual emissions by 48,000 tonnes of CO2e, the equivalent of taking 20,000 cars off New Zealand’s roads,” says Mr Hurrell.
Fonterra is #1 on the Food & Drink Business 2022 Top 100 Food & Drink Companies report.
