{"id":2352,"date":"2021-12-03T00:00:00","date_gmt":"2021-12-02T11:00:00","guid":{"rendered":"https:\/\/staging.farmersweekly.co.nz\/fonterra-lifts-payout-after-good-start-to-financial-year\/"},"modified":"2022-05-03T05:35:13","modified_gmt":"2022-05-02T17:35:13","slug":"fonterra-lifts-payout-after-good-start-to-financial-year","status":"publish","type":"post","link":"https:\/\/www.farmersweekly.co.nz\/news\/fonterra-lifts-payout-after-good-start-to-financial-year\/","title":{"rendered":"Fonterra lifts payout after good start to financial year"},"content":{"rendered":"Reading Time: <\/span> 3<\/span> minutes<\/span><\/span>

With a midpoint of $8.70\/kg MS, Fonterra would contribute more than $13.2 billion to the New Zealand economy.<\/i><\/p>\n

<\/p>\n

Fonterra has lifted and narrowed its milk price forecast for this season from $7.90-$8.90\/kg milksolids to $8.40-$9\/kg MS after a solid start to the 2022 financial year.<\/p>\n

<\/p>\n

It has also revised its earnings guidance to 25-35 cents per share from 25-40c per share because of the higher milk price.<\/p>\n

<\/p>\n

Fonterra chief executive Miles Hurrell says the lift is good news and is an important boost to New Zealand communities. With a midpoint of $8.70\/kg MS it would contribute more than $13.2 billion to the NZ economy.<\/p>\n

<\/p>\n

\u201cIt\u2019s the result of consistent strong demand for dairy at a time of constrained global supply,\u201d Hurrell said.<\/p>\n

<\/p>\n

\u201cWe\u2019ve seen the impact of a number of events play out this first quarter. That includes the high price of feed in the US, which has seen milk production growth stall and a lower-than-expected supply picture in Europe.\u201d<\/p>\n

<\/p>\n

He says they were well aware of the effects that rising input costs and inflationary pressures were having on farmers.<\/p>\n

<\/p>\n

\u201cThere\u2019s no doubt that inflationary pressures are starting to be felt on a global basis and we see that and hear that every day on the farm. Our farmers\u2019 costs are increasing,\u201d he said.<\/p>\n

<\/p>\n

At this stage, he did not think it would have an adverse reaction to milk production. While Fonterra\u2019s NZ milk supply was down 3% on this time last season, Hurrell says he was confident the co-operative will meet its production forecast of 1525m kg MS collected.<\/p>\n

<\/p>\n

A 30% increase in whole milk powder prices helped Fonterra deliver an EBIT of $190 million for the three months ending October 31. While this was down $60m compared to the same time last year, the company was operating in a very different environment compared to 12 months ago.<\/p>\n

<\/p>\n

This was achieved at a time when input costs are significantly higher than the same period last year.<\/p>\n

<\/p>\n

Hurrell says there have been a number of factors at play in the first quarter.<\/p>\n

<\/p>\n

\u201cWe\u2019re seeing stable sales volumes in our foodservice channel, but a milk price at these high levels has squeezed margins. Our Chilean business continues to improve but tightening margins and weaker local currency in other markets have impacted our consumer channel overall,\u201d he said.<\/p>\n

<\/p>\n

\u201cIn our ingredients channel, we\u2019re seeing margins in our longer-term pricing contracts return to more normal levels, which has helped push total group gross margin up from the last quarter last year.<\/p>\n

<\/p>\n

\u201cWe continue to see the benefit of our focus on financial discipline with lower interest expense, and operating expenditure down 2% on the same quarter last year.\u201d<\/p>\n

<\/p>\n

Looking ahead, Hurrell says covid-19 continued to be a \u201cwatch out\u201d for them as new strains became new unknowns. <\/p>\n

<\/p>\n

The ongoing uncertainties from whether economies can recover from covid-19 also helped shape Fonterra\u2019s 60c milk price forecast range.<\/p>\n

<\/p>\n

While demand had softened slightly in China, it remained strong globally and Hurrell believed that would be the case for the rest of the season as supply remained constrained.<\/p>\n

<\/p>\n

Chief financial officer Marc Rivers says he was pleased how well margins had held up so far this season.<\/p>\n

<\/p>\n

\u201cThe key is what happens to all of the different components of the products across the portfolio,\u201d Rivers said.<\/p>\n

<\/p>\n

At the same time last year, Fonterra was looking at a milk price of $6.80\/kg MS and was giving an earnings guidance of 20-35c.<\/p>\n

<\/p>\n

\u201cNow we\u2019re sitting on a milk price of $8.70 and an earnings guidance of 25-35 (cents). We\u2019re really pleased that the business has been able to hold up the margins, as well as we have in the context of a very high milk price,\u201d he said.<\/p>\n

<\/p>\n

Fonterra has also appointed JP Morgan, UBS and Jarden as advisors for its review into its Chilean and Australian operations respectively.<\/p>\n

<\/p>\n

\u201cIn the meantime, both businesses \u2013 Chile and Australia \u2013 are doing very well,\u201d he said.<\/p>\n

<\/p>\n

Hurrell also touched on the capital restructuring vote on December 9, saying he was confident shareholders will vote in favour of it.<\/p>\n

<\/p>\n

\u201cWe always said we wouldn\u2019t take it to a vote unless we felt there was some momentum,\u201d Hurrell said.<\/p>\n","protected":false},"excerpt":{"rendered":"Fonterra has lifted and narrowed its milk price forecast for this season from $7.90-$8.90\/kg milksolids to $8.40-$9\/kg MS after a solid start to the 2022 financial year.\n","protected":false},"author":20,"featured_media":618,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_FSMCFIC_featured_image_caption":"","_FSMCFIC_featured_image_nocaption":"","_FSMCFIC_featured_image_hide":"","footnotes":""},"categories":[3],"tags":[21,51,74],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t