Fonterra chair Peter McBride says the co-operative’s strong result for the 2024 financial year are the culmination of a lot of effort and hard work from its senior leadership team.
It posted a $1.128 billion profit after tax, announced a 55 cent per share dividend and lifted its forecast milk price for the 2024-2025 season by 50 cents to a new midpoint range of $9/kg MS.
Farmers have been doing it tough over the past couple of years and in some cases struggling to break even, McBride said.
“We’re really pleased to announce these results.”
Fonterra chief executive Miles Hurrell said it has been a strong year that maintained the strong momentum seen in 2023.
It also shows how much Fonterra has recovered from 2018, when it posted a $196 million loss.
Asked if he and the rest of the senior management team had reflected on the turnaround in performance, Hurrell said they are always looking forward to the next long-term target.
“We’re now looking at 2027-2029 – that’s where our heads are at.”
Looking back, he said, they were doing it tough back in 2018 and were forced by circumstances to simplify the business and get back to its core functions.
“The purpose in what we stand for and the fact that we are a co-operative resonates. Our people in all parts of the world know we’re a co-operative and everything they do trickles back to rural NZ and a small town somewhere – that means something.”
The 55 cents per share total dividend comprises of a 15 cent interim and 25 cent final dividend and 15 cent special dividend.
Hurrell said the special dividend came from capital management efficiency and ongoing balance sheet strength.
The final milk price for 2023-2024 was $7.83/kg MS, the fourth biggest in Fonterra’s history, but below those of the two previous seasons.
The total payout for a fully shared-up farmers was $8.38/kg MS, close to the break-even level for farming operations.
The 50 cent lift in the forecast for the current season included a new range of $8.25-$9.75/kg MS.
Its forecast earnings for the current season are 40-60 cents a share, reflecting an expectation it will maintain strong margins in all three of its sales channels, Hurrell said.
The midpoint is second only to the 2021 payout of $9.30/kg MS.
Earnings per share from continuing operations were 70c, an aggregate before interest and tax (EBIT) of $1.56bn, down from $1.75bn the year before. Net debt at balance date was $2.6bn, now only half what it was five years ago.
Hurrell said he has had “plenty” of feedback so far on the new forecast via texts and messages from farmers.
“The phone’s been ringing a lot this morning and it’s been well received. We’ve come off the back of a couple of tough years behind the farmgate where we struggled to break even and it will be very welcomed.
“I think there’s some capital expenditure that farmers haven’t been able to invest in the last couple of years so while it’s a fantastic number, there’s a couple of years’ catch-up that I think farmers are looking forward to.”
McBride was more circumspect, saying while the $9 forecast helped, a $9 payout today was not the same as a similar forecast a few years ago.
He pointed out that farmers are still facing high costs around interest rates, fertiliser and labour.
“All of those inputs have been pretty much out of control over the last three years. That’s starting to abate now, so farmers margins are starting to improve again.
“I think it takes us a long way in the right direction. I think farmers will be pleased with the announcement and pleased with our advanced rate – cash flow’s really important. I think it’s really positive, but we have to put it in perspective.”
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