Fonterra CEO Miles Hurrell says the company’s net profit after tax of NZ$1.6 billion (all dollars reported are NZ$) shows it is focusing on the right strategic priorities.
Snapshot
- NPAT: $1.6 billion, up 170%;
- Final 2022/23 season Farmgate Milk Price: $8.22 per kgMS;
- Return on Capital: 12%, up from 6.8%; and
- Full year reported earnings: 95 cents/share, up from 36 cents/share.
Hurrell said the season’s Farmgate Milk Price was impacted by reduced demand for whole milk powder from its key importing regions. Global Dairy Trade prices also dropped and the average whole milk powder price was down 16 per cent compared to last season.
“We recognise the impact the reduced Farmgate Milk Price has on farmers’ businesses and have utilised our strong balance sheet to introduce a new Advance Rate Schedule guideline to assist on-farm cash flow.
“However, we’re pleased to be announcing a strong full year dividend of 50 cents per share - comprising an interim dividend of 10 cents per share and a final dividend of 40 cents per share.
“In addition, the Co-op returned tax free 50 cents per share to shareholders and unit holders in August, following the divestment of Soprole, giving a final cash pay-out to farmers of $9.22 per share backed kgMS,” Hurrell said.
Fonterra sold its Soprole business to Gloria Foods for $1.055 billion in November 2022.
Hurrell said there were several factors at play for the strong results including favourable margins in the ingredients channel, particularly the cheese and protein portfolios.
The Foodservice channel improved due to increased product pricing and higher demand.
“Across the second half, the operating performance of our Consumer channel strengthened due to improved pricing. However, we adjusted the long-term outlook for our Asia Brands and Fonterra Brands New Zealand business, resulting in full year impairments of $101 million and $121 million respectively,” he said.
Core Operations reported a profit after tax increase from $532 million to $572 million due to higher ingredients margins.
It’s Global Markets business was up $77 million to $385 million due to increased sales and improved pricing, but was offset by impairments in the Consumer channel.
“Greater China’s reported profit increased by $11 million to $284 million, with the Foodservice channel showing improved margins and resilience to market disruption from Covid” Hurrell said.
He said the company had made good progress towards its 2030 goals, that came from a company reset in 2021.
On sustainability, it has increased its target to reduce Scope 1&2 emissions by 2030 from 30 per cent to 50 percent. Discussions with farmers have also begun on introducing a Scope 3 target, with the company announcing its target by the end of the year.
“Wer’re also progressing work in our innovation portfolio, including establishing our joint venture with Royal DSM, Vivici, which is exploring commercial opportunities in fermentation derived ingredients and launching our corporate ventures arm Nutrition Science Solution (NSS). It made its first strategic investment in the form of a minority stake in Pendulum Inc, a biotech company specialising in metabolic health,” Hurrell said.
