Fonterra Co-operative Group Ltd last week released its FY24 interim results which show a continuation of strong earnings performance.
Fonterra’s reported profit after tax of $674 million is up $128 million on this time last year, with EBIT from continuing operations up 14 percent to $986 million over the same period.
The Co-op has reported a return on capital for the last 12 months of 13.4 percent, up from 8.6 percent on this time last year, and earnings per share of 40 cents, up from 33 cents.
CEO Miles Hurrell says the Co-op’s performance has been driven by higher margins and sales volumes across Fonterra’s diversified product and category mix.
“I’m pleased to report we’ve continued the positive momentum seen in our earnings performance and delivered an interim dividend of 15 cents for our Co-op’s farmer shareholders and unit holders, up from 10 cents this time last year.
“The forecast Farmgate Milk Price has also lifted recently, with a current midpoint of $7.80 per kgMS, following volatility earlier in the season.
“While supply and demand dynamics remain finely balanced, with continuing global uncertainty, we are now well progressed through the season. This gives us the confidence to narrow our forecast Farmgate Milk Price range to $7.50 – $8.10 per kgMS.
“We have also maintained our forecast earnings guidance for the year of 50-65 cents per share,” says Hurrell.
Fonterra is a co-operative owned and supplied by thousands of farming families across New Zealand.
“Our FY24 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 following historically high price relativities last year,” says Hurrell.
Trade outlook
“Sales volumes from continuing operations are up 22kMT or 1.3 percent to 1,721kMT and gross margins are up from 16.6 percent to 18.4 percent.
“Global Markets’ reported profit after tax is up $230 million to $380 million, due to lower input costs in Southeast Asia, Sri Lanka and Fonterra Brands New Zealand. Fonterra Australia’s performance has been impacted by the higher Australian milk price.
“In February, we announced plans to merge our Australia and Fonterra Brands New Zealand businesses from 1 May. These two units share many similarities, and we expect the integration to create scale efficiencies.
“Greater China reported profit after tax is up $94 million to $232 million, primarily due to strong performance in the Foodservice channel.
“Looking out to the remainder of the year, while global inflationary pressures are easing, we are monitoring the potential for volatility as a result of geopolitical instability.
“Our partnership with Kotahi and diversification across markets means we’re well prepared for disruption in global supply chains or changes in demand from key importing regions.
“We’re pleased with our first half performance for FY24 and look forward to the second half as we continue to deliver for our farmer shareholders and unit holders,” says Hurrell.
