NEW ZEALAND – Fonterra, New Zealand’s largest dairy cooperative, has posted a net profit of NZ$1.17 billion for the fiscal year ending in July, a decrease from last year’s record profit of NZ$1.6 billion.
Despite the decline, Fonterra has maintained strong financial performance and lifted its payout to farmers, continuing its momentum into FY24.
The cooperative reported earnings before interest and tax (EBIT) from continuing operations of NZ$1.56 billion, reflecting its robust business despite the global challenges affecting profitability.
The co-op’s final Farmgate Milk Price for the 2023/24 season was set at NZ$7.83 per kilogram of milk solids (kgMS), contributing to a total cash payout of NZ$8.38 per kgMS for fully shared-up farmers, which included a total dividend of 55 cents per share.
According to CEO Miles Hurrell, Fonterra’s results show the co-op’s long-term resilience and its ability to maintain positive momentum while supporting its farmer shareholders.
In its annual report, Fonterra’s performance was driven by higher margins and increased sales in its Foodservice and Consumer channels, although returns from the Ingredients channel were slightly lower compared to the record levels seen in FY23.
The cooperative’s operating costs per kilogram of milk solids decreased by 2%, reflecting operational improvements, while cash operating expenses increased due to investments in digital transformation and IT projects.
Fonterra also continued to strengthen its balance sheet, reducing net debt by NZ$600 million, bringing it to NZ$2.6 billion.
The company’s gearing ratio improved to 24%, supported by higher equity from strong earnings, positioning the cooperative with the flexibility to navigate market volatility and explore new growth opportunities.
In addition, Fonterra also made strategic advancements, including the exploration of divestment options for its global Consumer business and Fonterra Oceania and Sri Lanka.
Meanwhile, the cooperative is working with advisors to assess these options, ensuring that any future decisions will maximize value for farmer shareholders.
Hurrell noted that Fonterra remains focused on enhancing long-term value creation and will share further details on its revised strategy in the coming weeks.
Earlier this year, the dairy giant adopted a careful approach as it headed into the new season despite reporting solid increases in milk sales and after-tax profits.
According to Hurrell, there is a “finely balanced” dynamic supply and demand and ongoing challenges, particularly regarding China’s import volumes, which the company is yet to rebound to pre-pandemic levels.
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