Fonterra has just announced record financial results for the 2011 financial year, saying big exports and contributions from its overseas businesses will mean more than $10 billion flowing into the New Zealand economy.
It has just announced a record payout of $8.25, comprising a "Farmgate Milk Price" of $7.60 per kilogram of milksolids for the 2011 season and a "Distributable Profit" of 65 cents per share for 2011.
This payout is $1.55 ahead of the prior period's $6.70 and exceeds the previous record of $7.90 in 2008. The cash payout of $7.90 is also a record and is $1.53 higher than the prior period's $6.37.
Other highlights of the financial result include:
•A 13 per cent increase in after tax profit to $771 million for the year ended 31 July 2011.
•A 19 per cent increase in revenue to $19.9 billion, a new record for Fonterra.
•The annual dividend is being increased to 30 cents per share, a 3 cents per share or 11 per cent increase on last year's 27 cents per share. Dividends are paid out of its distributable profit.
•Fonterra collected a record 1,346 million kgMS of raw milk in the 2011 season, 5 per cent higher than the prior season.
•Dairy exports for the year totalled 2.1 million tonnes, another record.
Chairman Sir Henry van der Heyden said the record financial performance and record milk production meant Fonterra would distribute milk payments and dividends totalling $10.6 billion - $2.4 billion more than in 2010 and $1.5 billion more than Fonterra's previous best year in 2008.
"As Fonterra is a Co-operative that is 100 per cent owned and controlled by New Zealand farmers, that money flows right back into the local economy as farmers reinvest in their businesses and buy more farm supplies and equipment," he said.
Van der Heyden said the record farmgate milk price of $7.60 was well up on the prior season's $6.10 and reflected the recent strength of world dairy markets, with prices in some categories reaching or nearing historical highs during the past year.
"We also benefited from record milk production, as some of the best autumn conditions in recent years offset poor weather in many regions earlier in the season."
Fonterra chief executive Andrew Ferrier said Fonterra achieved a 13 per cent increase in net profit after tax, to $771 million, even after paying farmer shareholders 29 per cent more for the milk they supplied.
"Although the business was impacted by higher dairy ingredient prices and a fragile global economy, our underlying profitability showed solid growth over last year due to improvements within our ingredients businesses and the strength of our consumer brands."
Revenue from the consumer businesses hit a new record of $6.1 billion. However, the consumer businesses faced a challenging year as margins came under pressure from the rise in commodity prices.
Ferrier said the standout consumer business segment was Asia/Africa, Middle East, with normalised earnings rising 12 per cent. "We continue to focus on high quality nutritional and foodservice solutions that leverage our trio of power brands, Anchor, Anlene and Anmum."
In the Australia/New Zealand region, however, earnings fell 17 per cent.
Ferrier said margins were compressed as "a fiercely competitive market environment made it harder to reflect fully higher commodity prices in consumer pricing." "Although it was undoubtedly a tough year in New Zealand and Australia, our market leadership positions across most categories mean we are in a sound position to work through current market challenges."
Chair of Fonterra's Shareholders Council Simon Couper said the payout was a great result, and one that all New Zealanders would benefit from.
Couper: "The record payout has been driven by record revenues which equates to over 10 times the forecast total economic activity of $1.15bn for the 2011 Rugby World Cup.
"It is a heartening result for shareholders especially given the struggles of the past couple of years when many farmers have faced the impact of drought conditions and are recovering from volatile markets, said Couper.
"The payout presents an opportunity for farmers to reduce the high debt ceiling they carry and put money back into their businesses and with 50 cents from every dollar a famer earns going back into the local economy the extra payout is great news for our communities."
Couper said there are still some areas the Shareholders' Council believed required more attention from the Fonterra Board.
"The rise in corporate costs and the fall in normalised earnings in the Australia-New Zealand business segment is something the Shareholders' Council will be keeping an eye on.
"We will be watching the board's strategy to overcome the issues in these areas with great interest."
- NZ HERALD ONLINE