Cooperative reports strong financial result despite heavy investment in new systems.
Fonterra CEO Miles Hurrell told shareholders today the dairy giant’s IT and digital transformation project to replace its aged enterprise resource planning software was progressing well and on budget.
Describing the investment as a “once in a generation” replacement, Hurrell said the project was expected to cost NZ $450 million to $500 million over six years with annual expenditure reaching a peak in the 2025 financial year at $130 million.
“This spend is included in our previously announced earnings forecast and despite this spend, our FY25 results remain strong,” Hurrell said.
Fonterra reported a half-year after tax profit of $729 million, earnings of 44 cents a share and a decision to pay an interim dividend of 22 cents per share.
“At the same time, we’re looking ahead as we implement our strategy and continue to invest for the future.”
That included projects to unlock manufacturing production capacity for Fonterra’s ingredients and foodservice channels.
In 2020, Fonterra went live on HCL’s infrastructure-as-a-service marking the beginning of the cooperative’s technology renewal.
The same year it signed up to become one of the earliest users of Microsoft’s NZ datacentre region.
That project, which focused on the replacement of outdated infrastructure and improving security, covered IaaS, end-to-end network services, service desk, cyber security and collaboration.
A Microsoft Teams rollout was also brought forward to replace legacy Skype while laptop platforms were renewed and standardised, as were mobile devices.
The cooperative’s enterprise application landscape, however, remained fractured and dated.
“We still run a fairly bespoke, customised set of legacy processes and therefore systems and integrations,” Fonterra chief technology officer Toby Granwal said at the time.
“We’ve still got SAP, still got JDE, a lot of custom applications, we’ve got multiple instances of SAP. A lot probably hasn’t changed much.”
Fonterra was running multiple instances of legacy SAP, JDE and a lot of custom applications, he said.
Prioritising the foundational layer of infrastructure would earn the cooperative the right to talk about what to do from an ERP and application transformation perspective, Granwal said.
There are certainly signs of progress, with Fonterra now among the earliest adopters of Microsoft’s Copilot AI technology, with hundreds of use cases found.
It has also renewed its tanker fleet management technology with systems from Auckland-based Eroad.
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