Fonterra’s first half profit jumps 50pc, doubles dividend

Dairy co-op Fonterra has reported its first half result. Photo / supplied

Fonterra said diversification helped the co-op lift its net profit by 50 per cent to $546 million in the first half.

The co-op doubled its interim dividend to 10c and has forecast a milk price of $8.20 to $8.80 per kg for the current season.

Earnings per share came to 33 cents.

Fonterra has also proposed a return of capital of 50 cents per share and per unit, subject to completion of the sale of Chilean food group, Soprole.

It has also upgraded its full-year normalised earnings forecast from 50-70 cents per share to 55-75 cents per share.

Chief executive Miles Hurrell said the results showed the co-op was performing well against a backdrop of ongoing market volatility.

“Our co-op’s scale and diversification across channels and markets has enabled us to navigate through disruption and make the most of favourable market conditions in a number of areas,” he said.

“While milk powder prices have softened recently, impacting our forecast Farmgate milk price range, protein prices have been high, and this is reflected in the lift in earnings,” he said.

Hurrell said the outlook for New Zealand dairy remained positive.

Return on capital came to 8.6 per cent, up from 6.1 per cent in the comparable period.

The lift in earnings was down to the co-op’s scale and ability to move milk into products and markets where there were favourable prices, he said.

“With whole milk powder prices down, we moved more milk into skim milk powder and cream products to optimise our farmgate milk price.

“We also made the most of favourable margins in our cheese and protein portfolios, by moving a higher proportion of current season milk into these products which has benefited our earnings.”

Fonterra’s ability to capture these higher margins was reflected in our Ingredients channel performance, with normalised ebit up $494m, or 118 per cent, on the same time last year to $911m.

“Our Consumer and Foodservice channels benefited from improved in-market prices, with Foodservice normalised ebit up $81m, or 95 per cent, to $166m.”

However, higher input costs and ongoing pressure on margins have impacted overall Consumer channel performance.

The co-op’s domestic consumer business, Fonterra Brands New Zealand (FBNZ), had been under margin pressure for some time and is not improving as fast as planned.

The performance of Fonterra’s Asia consumer brands has been impacted by weakening currency in the markets they operate, higher interest rates and a declining economic environment in some South East Asian markets.

Fonterra had therefore revised down the valuation of FBNZ by $92m and its Asia consumer brands Anlene, Chesdale and Anmum by $70m.

As a result of market conditions and the impact of impairments, Fonterra’s overall Consumer channel normalised ebit is down $177m to a loss of $94m.

Fonterra said severe storms and flooding across the North Island in January and February temporarily delayed some product getting onto ships

The co-op said it remained focused on inventory management, which seasonally peaks through February and March.

Meanwhile, Greenpeace protested at Fonterra’s Auckland headquarters this morning to raise issues about climate change.

Greenpeace protested at Fonterra’s Auckland headquarters this morning. Photo / Supplied

“Greenpeace is installing flooding images around the windows that make the Fonterra headquarters look as if it’s underwater,” the group said.

“Crime tape being deployed along with the ruined remains of people’s household items [highlights] the liability of Fonterra and the intensive dairy industry for destabilising the climate.”

Fonterra has set itself a target of 30 per cent reduction in manufacturing emissions by 2030 and net zero emissions for manufacturing sites by 2050.

It had also pledged to stop using coal by 2037.