Fonterra has delivered an early Christmas uplift for its farmers by increasing the farmgate milk price midpoint by 25c to $7.50, and narrowing the forecast range to $7-$8/kg milksolids.
With the firming of the forecast range the advance payment schedule also lifts 30c to $5.75 for both the December and January payments.
Not done with the festive season news, Fonterra has also increased the earnings guidance for FY2024 by 5c a share, in a range of 50c to 65c.
The good news capped a robust set of first-quarter financial results, in which profit after tax from continuing operations rose 85% to $392 million and earnings per share went up from 13c to 24c.
Foodservice and consumer margins rose substantially as lower milk input costs were paired with latent high dairy product prices.
The revised forecast reflected recent strengthening in demand for reference commodity products from key importing regions, including China, Fonterra chief executive Miles Hurrell said.
“Global Dairy Trade prices have lifted, and our sales book is also well contracted for this time of year, giving us confidence to increase our forecast milk price.”
Higher margins across ingredients, foodservice and consumer channels have driven the lift in earnings, with gross margin up from 15.5% this time last year to 21.4%.
“Looking ahead, we expect these higher margins to continue throughout the first half of the year, before tightening across all three sales channels in the second half of the year, due to higher input costs and the gap between reference and non-reference product prices narrowing.
“Our increased forecast earnings guidance of 50-65c per share reflects this and we are on track for a strong interim dividend,” Hurrell said.
Elsewhere in the Q1 announcements, Fonterra said its spring peak milk collection was 76 million litres on one day in late October, down from 78 million last year.
Total milk collection in the season to the end of October was 0.7% behind the previous season.