It has been a strong start to the trading year for New Zealand dairy co-op Fonterra, with the half year results showing significant growth across all the key metrics.
In the six months to the end of February, Fonterra’s earnings before interest and taxation were up a healthy 14% to NZ$986m (€548m) compared with the same period last year, with reported profit after tax up 23% to NZ$674m (€374m).
An interim dividend of NZ15c (8c) per share was announced, up from NZ10c (6c) per share for the first half of the previous year. Earnings were NZ40c (22c) per share, and full earnings for the 2024 financial year are forecast to be in the NZ50c (28c) to NZ65c (36c) per share range.
During this period, NZ$804m (€447m) was returned to farmers, shareholders and unit holders following completion of the sale of Chilean dairy processor Soprole and the DPA joint venture with Nestlé in Brazil.
Milk price
CEO Miles Hurrell was also bullish about milk price for the second half of the financial year.
He said that “the forecast Farmgate Milk Price has also lifted recently, with a current midpoint of NZ$7.80 per kgMS (€0.28/l), following volatility earlier in the season,” and he forecasted a price range between NZ$7.50 and $8.10 per kg of milk solids (€0.27/l and €0.30/l) for the remainder of the year.
He attributed the strong results to increased earnings from the Consumer and Food service divisions due to “improved pricing and higher sales volumes.”
He noted that the “ingredients channel earnings are down year on year off the back of historically high price relativities in FY23 and lower margins in Australia Ingredients during FY24” while exports or “global markets” returned profit after tax of NZ$ 380m (€211m), up from NZ$230m (€128m) in the same period last year.
Outlook
Fonterra announced in February that it would “merge our Australia and Fonterra Brands New Zealand businesses from 1 May” with the expectation that this will create scale efficiencies.
In addition to the strong first half performance, the chief executive is positive for the remainder of the financial year saying that “while global inflationary pressures are easing, we are monitoring the potential for volatility as a result of geopolitical instability.”
While the main Irish dairy co-ops’ financial year runs alongside the calendar year, and their results will be released over coming weeks, Fonterra’s financial year ends on 31 July.
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