Rabobank report cautions, however, that co-op’s strategic shift will cost it in the rankings in years to come.
Fonterra has jumped three places from nine to six in Rabobank’s annual Global Dairy Top 20 following its strong financial result for the 2023 financial year.
The report, which highlights the financial results of key global dairy industry leaders, calls its performance “strong”.
“Compared to the prior year and based on initially reported data, revenue on a NZ dollar basis climbed $7.1%.”
It also noted that because Fonterra’s financial year-end was July 31, higher revenues likely reflect higher commodity prices through the second half of 2022, possibly skewing comparisons with other global dairy companies with different financial year-end dates.
The report says the co-operative’s performance would have been higher except the data excluded the revenue from the sale of its Chilean Soprole business, China Farms and DPA Brazil.
“Fonterra will likely not maintain its No 6 position in the coming years as the co-operative’s strategic shift to focus on its core business could possibly lower the company’s ranking moving forward,” it says.
That step change could see Fonterra divest some or all of its consumer businesses including Fonterra Oceania and Fonterra Sri Lanka.
“If all the considered divestments come to fruition, this could represent 15% of the company’s milk solid utilisation and 19% of the group’s earnings, representing a sale value of more than $2 billion.”
These deals are one of a multiple that could take place within the global dairy market, some of which could be the largest the sector had seen in some time, it says.
“Companies are re-examining priorities and in some cases returning to core businesses while shedding parts of the business that are less profitable or misaligned with key strategic priorities.
“For some, sustainability goals might come into play, with increasing pressure from impending, self-imposed or industry-driven commitments leading to a re-examination of assets and priorities.”
French company Lactalis retains its No 1 ranking while Nestlé is No 2 and Dairy Farmers of America No 3, having swapped places from last year.
Danone and Yili retain their fourth and fifth ranking ahead of Fonterra. Denmark-Sweden company Arla Foods drops from sixth to seventh and Netherlands company FrieslandCampina falls one place to eighth.
Chinese company Mengniu falls from eighth to ninth and Saputo remains at 10.
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