Jaded Fonterra shareholders were given cause for optimism today when the co-op reported a big lift in its interim earnings.
But for chief executive, Miles Hurrell, the co-op is only half-way there.
Fonterra earlier reported a big lift in first half profit but opted not to declare an interim dividend given the possible impact of the Covid-19 pandemic on the rest of the year's earnings.
The co-op posted a normalised net profit after tax of $293 million in the six months to January 31, up from $72m in the prior year.
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Normalised earnings, which exclude one-off costs and minority interests, before interest and tax were $584m from $312m.
Despite weak Global Dairy Trade auction prices, Fonterra kept its current farmgate milk price forecast in a $7.00 to $7.60/kg range and maintained its full year earnings forecast of 15 to 25 cents a share.
A milk price in that range is enough to keep most dairy farmers solvent.
Fonterra, which last year reported a record loss of $605m, has been selling assets, reorganising its operations and reducing debt as it adopts a back to basics approach.
Hurrell told the Herald he was pleased with the outcome but that there was more to be done.
"I think if you look overall at the strategic reset that has been under way, maybe this is a stake in the ground," he said. "Maybe we are half-way through that in terms of where we need to go as an organisation."
As it stands, the co-op is selling down its minority stake in China's Beingmate and has its China Farms and its share of a Brazilian joint venture on the block.
Hurrell said Fonterra has in the past been accused of not being dynamic enough in managing its investment portfolio.
"We need to get to a mindset that if we buy an asset or develop something new, to keep continually reviewing it and asking if this is the right time to harvest it and move out.
"Over time, we may see more businesses come and go as we maintain a more dynamic approach."
"The half-year results paint a picture that we are starting to build some credibility," he said.
While Fonterra has some South American assets under review, Hurrell said its Chilean unit, Soprole, was not for sale.
But Hurrell conceded Soprole was the odd man out, as it takes very little product from Fonterra itself.
"Yes, it uses very little New Zealand milk - we acknowledge that - but it is still a very good earner for our business," Hurrell said.
"If we were going to make any decisions we would have to think through that very carefully, but at this point no decision has been made," he said.
Hurrell, commenting on the impact that the coronavirus had on Fonterra's ability to get product into China, said the co-op's long-standing strategic partnership with shipping giant Maersk had helped its position.
Dairy is regarded as a stable food in the PRC, ranking up there with medical supplies. While there had been some delays, there was nothing of concern in terms of landing product there, he said.
Hurrell said the half year result was a fair reflection of the extent of change in the organisation in recent times.
Commenting on the oil price slump and the historical correlation between oil and dairy, Hurrell said it was not yet having an impact.
Harbour Asset Management senior research analyst Oyvinn Rimer said Fonterra's result was strong, under the circumstances.
He noted Fonterra's guidance remained strong for the full year.
The operating performance was largely driven by a significantly lower operating expense.
"The balance sheet also looks better with net debt and gearing reduced, but still above long-term targets," Rimer said.
ASB Bank's Nathan Penny said the New Zealand dairy sector looked to be in a better place than most as corporates here and around the world struggle to adapt to the outbreak.
Global dairy prices have fallen on the back of the coronavirus outbreak, but the lower New Zealand dollar meant that the outlook for farmgate milk prices remained healthy.
"At our current forecast levels for the milk price, the majority of farmers are likely to remain profitable," Penny said.
"In addition, Fonterra is reporting early signs of turning its performance around, maintaining its earnings guidance in its half-year results," Penny said.
"While still early days for the co-op, the results announced today are an encouraging start."