Fonterra almost guaranteed another good showing in 2025.
Listed primary sector companies in New Zealand begin 2025 with some strong following winds in higher commodity prices, lower interest rates and inflation back under control.
The gradual recovery of demand from China for our meat, dairy, fruit, fish and wool will be offset by a lower NZ dollar and the uncertainties to follow new protectionist policies in President Donald Trump’s United States.
The S&P/NZX Primary Sector Equity Index opened 2025 at 10,900, having gained close to 700 points over the course of 2024, a gain of about 6%.
The Top 50 Index for the NZ share market was up 11%, the best performance of that market since 2020.
The primary sector index tracks the market performance of 17 listed companies, ranging from the largest such as Fonterra and a2 Milk Company, to the smallest, like Greenfern Industries and Marlborough Wine Estates.
Greenfern is a medicinal cannabis producer with market capitalisation of under $3 million and a share price around 2c.
By contrast, a2 Milk has a market capitalisation of $4.5 billion and a share price above $6, the highest of all companies in the primary sector index.
Fonterra Co-operative Group (FCG) will jump to first place by market size early this year when it migrates from a private market to the NZX Main Board, bringing its $6.75bn capitalisation on a current share price of $4.20.
The Fonterra supply shares (FCG) rose 65% in 2024 and the Shareholders’ Fund units (FSF) rose 50% and currently are at $5.10.
The yield performances of FSF and FCG were the best by far among primary sector companies in 2024.
They had gross dividend yields of 10.5% and 13% respectively, plus their price increases.
Total shareholder returns during 2023 and 2024 have been very handsome and may repeat with the possible sale of the consumer brands and businesses.
Fonterra’s announcement in December of a 50c rise in the farmgate milk price forecast midpoint to a record $10/kg milksolids, along with the firm earnings guidance of 40-60c a share, almost guarantees another good share market performance for the dairy giant in 2025.
Earnings of 50c a share would produce another 10% gross yield, or better, which market analysts say will be among the best on the NZ share market.
Market leader a2 Milk has not paid a dividend in its 25-year history, despite $1.675bn revenue and 23c a share earnings in FY2024.
But it announced an inaugural dividend policy in late November targeting a payout ratio range between 60% and 80% of net profit after tax.
An interim dividend is expected with the half-year FY2025 results in February.
Genetics company LIC also had a good year, with earnings per share of 55c, half of that distributed by dividends, and a share price that returned to where it started in January, slightly under $1.
The rising tide of dairy prices may also help the rescue of Synlait Milk, where a $3 fall in share price over the past two years has bottomed out at 40c.
Synlait has never paid a dividend and it is not likely to start in 2025.
A search is underway for a new chief executive after Grant Watson’s departure in October.
Among the better performers in 2024 was Delegat Group, with a gross dividend yield of 5.8%, somewhat soured by a share price fall of 30%.
It now trades around $4.80, having touched $7 last April.
Fellow wine industry companies Foley Wines and Marlborough Wine Estates made a small profit and a loss respectively and Marlborough has now delisted to save costs.
A turbulent 2024 with majority shareholder Agria of Singapore took a toll on PGG Wrightson’s share price, cut in half to around $1.60 presently.
Trading results were down and no dividend was paid but directors are cautiously optimistic for recovery in 2025 as farmers and orchardists loosen the purse strings.
Horticultural companies Scales Corporation, Seeka and T&G Global performed much better in 2024 compared with 2023 and Cyclone Gabrielle’s destruction.
Scales made a net profit in the range $30m to $35m, with a dividend yield of 4% and a 17% lift in share prices during the year.
Seeka’s share price rose 23% and its yield was also 4%.
A number of poor results for T&G Global has prompted majority shareholder BayWa AG (74%) to investigate options for the sale of major holdings outside of Germany.
Two listed fishing companies provided a contrast in performance, with Sanford maintaining its share price and yielding 3% while NZ King Salmon lost 10% on share price and did not pay a dividend.
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