Fonterra Co-operative Group says its interim net profit after tax (NPAT) of NZ$729m showed the co-op was making “good progress on implementing its strategy”.
CEO Miles Hurrell said, “We’re focusing on driving value which includes delivering strong financial performance while achieving the highest sustainable farmgate milk price.”
Snapshot
- Operating profit: NZ$1,107m, up 16% on prior corresponding period (pcp);
- Profit after tax: NZ$729 million, up 8% pcp;
- Earnings per share: 44 cents per share, up 10% pcp;
- Return on capital: 10.2%, down from 13.4%; and
- Interim dividend, fully imputed: 22 cents per share.
Hurrell said the results reflected the strength of its core business, with projects underway to increase manufacturing production capacity in its Ingredients and Foodservice channels. Site works had also started at Studholme for high-value protein capacity and at Edendale for a new UHT cream plant.
“We’re also continuing to invest to future proof our operations and supply chain network, with work underway on a new Whareroa coolstore and plans for decarbonisation projects at Clandeboye, Edendale, Edgecumbe and Whareroa to secure energy supply and reduce the co-op’s emissions,” Hurrell said.
He also 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.
For the current season, the forecast farmgate milk price range is narrowing from $9.50-$10.50 per kgMS to $9.70-$10.30, with the midpoint holding at $10.00 per kgMS.
The Ingredients channel saw sales volume down 3.9 per cent and operating profit up $229 million to $696 million, reflecting better margins and improved product mix.
Foodservice sales volume grew 8.3 per cent in the half. Hurrell said Q2 gross margins were significantly up on Q1 as pricing adjusted to the higher milk price. Operating profit for the half was $230 million, compared to the record high of $342 million in FY24 when input costs were much lower.
“The Consumer channel saw good sales volumes, up 8.5 per cent, and margin growth, despite the higher farmgate milk price, with operating profit largely flat on prior period at $173 million,” he said.
The co-op is also completing a “once in a generation” replacement of its enterprise resource planning (ERP) software – a project expected to cost NS$450-500 million across six years, with expenditure peaking in FY25 at $130 million.
