Friday, April 19, 2024

Fonterra posts strong results

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Interim results for 2024 show earnings on the up.
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Fonterra’s interim results for 2024 show a continuation of strong earnings performance with its profit after tax up 23% to reach $674 million.

Its continuing operations EBIT was up 14% to $986m and its return up from 8.6% to 13.4%.

Fonterra CEO Miles Hurrell said the co-operative’s performance was driven by higher margins and sales volumes across Fonterra’s diversified product and category mix.

This has helped to offset lower returns in the ingredients channel following historically high price relativities last year.

“Sales volumes from continuing operations are up 22kMT or 1.3% to 1721kMT and gross margins are up from 16.6% to 18.4%.

“At the same time, our balance sheet position remains resilient, with our strong underlying performance and low debt position helping to further lower our financing costs this year.

“Operating expenses for continuing operations are up $52m on last year after removing the impact of FY23 impairments, due to increased labour costs, professional fees and investment in IT infrastructure,” he said.

Hurrell said Fonterra has lifted its interim dividend from 10 cents to 15 cents. The co-operative has maintained its midpoint forecast of $7.80/kg MS and narrowed its range to $7.50-$8.10/kg MS.

“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,” he said. 

“We have also maintained our forecast earnings guidance for the year of 50-65 cents per share.”

He said Fonterra’s consumer and foodservice earnings are up year on year, due to improved pricing and higher sales volumes.

“Ingredients channel earnings are down year on year off the back of historically high price relativities in FY23 and lower margins in Australia Ingredients during FY24.

“Global markets’ reported profit after tax is up $230m to $380m, 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 May 1. These two units share many similarities, and we expect the integration to create scale efficiencies.”

Greater China reported profit after tax is up $94m to $232m, primarily due to strong performance in the foodservice channel.

Core operations’ reported profit is down $154m to $102m due to lower price relativities compared to last year, which have been partially offset by NZ manufacturing efficiencies.

Looking ahead, while global inflationary pressures are easing, Hurrell said, Fonterra is 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.”

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