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Fonterra reports strong FY23 results

Fonterra has announced its results for the financial year ending 31 July 2023, with a reported profit after tax of NZD 1.6 billion (approx. $952 million).

The New Zealand dairy cooperative saw FY reported earnings of 95 cents per share, up from 36 cents per share in the year-ago period. Its reported profit after tax was up 170% on the previous year.

Fonterra’s final 2022/23 season Farmgate Milk Price of NZD 8.22 (approx. $4.89) per kgMS was impacted by “reduced demand from key importing regions,” the company’s CEO, Miles Hurrell, said in a statement announcing the results.

“As the financial year progressed, we saw Global Dairy Trade prices drop, with the average whole milk powder price down 16% compared to last season,” Hurrell said.

“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.”

Hurrell added that 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 NZD 9.22 (approx. $5.49) per share backed kgMS.

The company completed the divestment of Sorpole and China Farms across the financial year as part of a strategic focus on New Zealand milk. It has also been focusing on emissions reduction goals, introducing a new target of a 50% absolute reduction in Scope 1 and 2 emissions by 2030, from a 2018 baseline.

Fonterra reported a Return on Capital for the last 12 months of 12.4%, up from 6.8% in the comparable period.

According to Hurrell, key drivers enabling the business to deliver this result included favourable margins in its ingredients channel, in particular the cheese and protein portfolios.

He also noted that the company saw improved performance in its foodservice channel, due to increased product pricing and higher demand as Greater China’s lockdown restrictions began to ease from the start of the calendar year.

“On the supply side, full-year milk collections ended the season at 1,480 million kgMS. This is in spite of significant challenges that many farmers faced across New Zealand including rising input costs and adverse weather events in the North Island early in calendar year 2023,” Hurrell said.

Looking ahead, Fonterra has projected a 2023/24 Farmgate Milk price range of NZD 6.00 (approx. $3.57)- NZD 7.50 (approx. $4.46) per kgMS.

Its forecast earnings rage for continuing operations is 45-60 cents per share.

“We are watching market dynamics closely and there are indications demand for New Zealand milk powders will start to return from early 2024,” Hurrell concluded. “Demand for other products, including foodservice and our value-added ingredients, continues to be robust.”

“We acknowledge that across the year, farmers will continue to feel the pressure from high input costs and a reduced Farmgate Milk Price. We’ll continue to do all that we can to support farmers through this challenging period.”


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