Fonterra moving towards higher-margin products business.
Fonterra plan to move away from dairy commodities toward high value products. In a press release today Fonterra Chief Executive, Theo Spierings, commented that the reduction in forecast GlobalDairyTrade volumes reflects Fonterra’s strategy of moving from being commodities-driven to a more value-added, higher-margin products business. If Fonterra is able to achieve higher returns by moving into higher-margin products then investors will reap these rewards. Fonterra investors include those who hold shares in the Fonterra Shareholders’ Fund as well as their milk suppliers who hold shares directly in Fonterra. The price paid to farmers for milk supplied to Fonterra is linked directly to the prices attained on the twice monthly GDT auction. GDT prices are currently very high in historical terms so it will be a real test to see if Fonterra can improve their returns through alternative sales strategies. “The reduction in forecast GlobalDairyTrade volumes reflects Fonterra’s strategy of moving from being commodities-driven to a more value-added, higher-margin products business.” Theo Spierings Fonterra CEO Fonterra’s current forecast is for a 15% decline in its product volumes on GDT over the next 12 months. Much of this decline in forecast is in whole milk powder with forecast volumes for the remainder of this year 20% less than what was sold during the September to December period last year. Volumes on offer on August were higher than normal and this led to record sales volumes for that month. This led to Fonterra achieving its highest ever monthly revenue through GDT in August, selling 109,664 metric tonnes, worth NZD685 million. Fonterra Chief Executive, Theo Spierings, said, “The past two GDT events show continued confidence in our products and strong demand from many of our key markets”. “Our August GDT sales volume was up 27% on the same ti