Fonterra Cooperative Group, the world’s largest dairy exporter, increased its first-half dividend after improving margins boosted its earnings.
The Auckland-based company will pay shareholders 15 New Zealand cents a share, up from 10 cents a year earlier, it said Thursday in Wellington. First-half net income rose 23% from a year earlier to NZ$674 million ($410 million) even as revenue dropped following the sale of its Soprole business in China last year.
New Zealand dairy farmers will welcome the increased dividend, which will improve farm cashflow as the economy cools and inflation continues to bite. Fonterra continues to forecast that the price it will pay to suppliers for milk will be centered around NZ$7.80 per kilogram of milksolids.
The company also maintained its forecast that normalized full-year earnings will be 50 — 65 cents per share. First-half earnings were 44 cents a share, up from 37 cents a year earlier.
“Earnings have been driven by higher margins and sales volumes in our Foodservice and Consumer channels, which have helped to offset lower returns in the Ingredients channel,” said Chief Executive Office Miles Hurrell. “At the same time, our balance sheet position remains resilient, with our strong underlying performance and low debt position helping to further lower our financing costs.”
Gross profit margin rose to 18.4% from 16.6% a year earlier as the company sold more through Foodservice and Consumer, it said.
Weaker demand for protein and cheese in China hit margins in the Ingredients business while the price of lactose also dropped materially. By contrast, increased sales of long-life cream in China helped boost Foodservice earnings while Consumer unit profit was underpinned by volume growth in Sri Lanka and the Middle East.
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