NZ Herald
  • Home
  • Latest news
  • Herald NOW
  • Video
  • New Zealand
  • Sport
  • World
  • Business
  • Entertainment
  • Podcasts
  • Quizzes
  • Opinion
  • Lifestyle
  • Travel
  • Viva
  • Weather

Subscriptions

  • Herald Premium
  • Viva Premium
  • The Listener
  • BusinessDesk

Sections

  • Latest news
  • New Zealand
    • All New Zealand
    • Crime
    • Politics
    • Education
    • Open Justice
    • Scam Update
  • Herald NOW
  • On The Up
  • World
    • All World
    • Australia
    • Asia
    • UK
    • United States
    • Middle East
    • Europe
    • Pacific
  • Business
    • All Business
    • MarketsSharesCurrencyCommoditiesStock TakesCrypto
    • Markets with Madison
    • Media Insider
    • Business analysis
    • Personal financeKiwiSaverInterest ratesTaxInvestment
    • EconomyInflationGDPOfficial cash rateEmployment
    • Small business
    • Business reportsMood of the BoardroomProject AucklandSustainable business and financeCapital markets reportAgribusiness reportInfrastructure reportDynamic business
    • Deloitte Top 200 Awards
    • CompaniesAged CareAgribusinessAirlinesBanking and financeConstructionEnergyFreight and logisticsHealthcareManufacturingMedia and MarketingRetailTelecommunicationsTourism
  • Opinion
    • All Opinion
    • Analysis
    • Editorials
    • Business analysis
    • Premium opinion
    • Letters to the editor
  • Politics
  • Sport
    • All Sport
    • OlympicsParalympics
    • RugbySuper RugbyNPCAll BlacksBlack FernsRugby sevensSchool rugby
    • CricketBlack CapsWhite Ferns
    • Racing
    • NetballSilver Ferns
    • LeagueWarriorsNRL
    • FootballWellington PhoenixAuckland FCAll WhitesFootball FernsEnglish Premier League
    • GolfNZ Open
    • MotorsportFormula 1
    • Boxing
    • UFC
    • BasketballNBABreakersTall BlacksTall Ferns
    • Tennis
    • Cycling
    • Athletics
    • SailingAmerica's CupSailGP
    • Rowing
  • Lifestyle
    • All Lifestyle
    • Viva - Food, fashion & beauty
    • Society Insider
    • Royals
    • Sex & relationships
    • Food & drinkRecipesRecipe collectionsRestaurant reviewsRestaurant bookings
    • Health & wellbeing
    • Fashion & beauty
    • Pets & animals
    • The Selection - Shop the trendsShop fashionShop beautyShop entertainmentShop giftsShop home & living
    • Milford's Investing Place
  • Entertainment
    • All Entertainment
    • TV
    • MoviesMovie reviews
    • MusicMusic reviews
    • BooksBook reviews
    • Culture
    • ReviewsBook reviewsMovie reviewsMusic reviewsRestaurant reviews
  • Travel
    • All Travel
    • News
    • New ZealandNorthlandAucklandWellingtonCanterburyOtago / QueenstownNelson-TasmanBest NZ beaches
    • International travelAustraliaPacific IslandsEuropeUKUSAAfricaAsia
    • Rail holidays
    • Cruise holidays
    • Ski holidays
    • Luxury travel
    • Adventure travel
  • Kāhu Māori news
  • Environment
    • All Environment
    • Our Green Future
  • Talanoa Pacific news
  • Property
    • All Property
    • Property Insider
    • Interest rates tracker
    • Residential property listings
    • Commercial property listings
  • Health
  • Technology
    • All Technology
    • AI
    • Social media
  • Rural
    • All Rural
    • Dairy farming
    • Sheep & beef farming
    • Horticulture
    • Animal health
    • Rural business
    • Rural life
    • Rural technology
    • Opinion
    • Audio & podcasts
  • Weather forecasts
    • All Weather forecasts
    • Kaitaia
    • Whangārei
    • Dargaville
    • Auckland
    • Thames
    • Tauranga
    • Hamilton
    • Whakatāne
    • Rotorua
    • Tokoroa
    • Te Kuiti
    • Taumaranui
    • Taupō
    • Gisborne
    • New Plymouth
    • Napier
    • Hastings
    • Dannevirke
    • Whanganui
    • Palmerston North
    • Levin
    • Paraparaumu
    • Masterton
    • Wellington
    • Motueka
    • Nelson
    • Blenheim
    • Westport
    • Reefton
    • Kaikōura
    • Greymouth
    • Hokitika
    • Christchurch
    • Ashburton
    • Timaru
    • Wānaka
    • Oamaru
    • Queenstown
    • Dunedin
    • Gore
    • Invercargill
  • Meet the journalists
  • Promotions & competitions
  • OneRoof property listings
  • Driven car news

Puzzles & Quizzes

  • Puzzles
    • All Puzzles
    • Sudoku
    • Code Cracker
    • Crosswords
    • Cryptic crossword
    • Wordsearch
  • Quizzes
    • All Quizzes
    • Morning quiz
    • Afternoon quiz
    • Sports quiz

Regions

  • Northland
    • All Northland
    • Far North
    • Kaitaia
    • Kerikeri
    • Kaikohe
    • Bay of Islands
    • Whangarei
    • Dargaville
    • Kaipara
    • Mangawhai
  • Auckland
  • Waikato
    • All Waikato
    • Hamilton
    • Coromandel & Hauraki
    • Matamata & Piako
    • Cambridge
    • Te Awamutu
    • Tokoroa & South Waikato
    • Taupō & Tūrangi
  • Bay of Plenty
    • All Bay of Plenty
    • Katikati
    • Tauranga
    • Mount Maunganui
    • Pāpāmoa
    • Te Puke
    • Whakatāne
  • Rotorua
  • Hawke's Bay
    • All Hawke's Bay
    • Napier
    • Hastings
    • Havelock North
    • Central Hawke's Bay
    • Wairoa
  • Taranaki
    • All Taranaki
    • Stratford
    • New Plymouth
    • Hāwera
  • Manawatū - Whanganui
    • All Manawatū - Whanganui
    • Whanganui
    • Palmerston North
    • Manawatū
    • Tararua
    • Horowhenua
  • Wellington
    • All Wellington
    • Kapiti
    • Wairarapa
    • Upper Hutt
    • Lower Hutt
  • Nelson & Tasman
    • All Nelson & Tasman
    • Motueka
    • Nelson
    • Tasman
  • Marlborough
  • West Coast
  • Canterbury
    • All Canterbury
    • Kaikōura
    • Christchurch
    • Ashburton
    • Timaru
  • Otago
    • All Otago
    • Oamaru
    • Dunedin
    • Balclutha
    • Alexandra
    • Queenstown
    • Wanaka
  • Southland
    • All Southland
    • Invercargill
    • Gore
    • Stewart Island
  • Gisborne

Media

  • Video
    • All Video
    • NZ news video
    • Herald NOW
    • Business news video
    • Politics news video
    • Sport video
    • World news video
    • Lifestyle video
    • Entertainment video
    • Travel video
    • Markets with Madison
    • Kea Kids news
  • Podcasts
    • All Podcasts
    • The Front Page
    • On the Tiles
    • Ask me Anything
    • The Little Things
  • Cartoons
  • Photo galleries
  • Today's Paper - E-editions
  • Photo sales
  • Classifieds

NZME Network

  • Advertise with NZME
  • OneRoof
  • Driven Car Guide
  • BusinessDesk
  • Newstalk ZB
  • Sunlive
  • ZM
  • The Hits
  • Coast
  • Radio Hauraki
  • The Alternative Commentary Collective
  • Gold
  • Flava
  • iHeart Radio
  • Hokonui
  • Radio Wanaka
  • iHeartCountry New Zealand
  • Restaurant Hub
  • NZME Events

SubscribeSign In
Advertisement
Advertise with NZME.
Home / Business

Fonterra forecasts fourth highest milk price in its history

Jamie Gray
By Jamie Gray
Business Reporter·NZ Herald·
4 Dec, 2019 07:17 PM4 mins to read

Subscribe to listen

Access to Herald Premium articles require a Premium subscription. Subscribe now to listen.
Already a subscriber?  Sign in here

Listening to articles is free for open-access content—explore other articles or learn more about text-to-speech.
‌
Save

    Share this article

Fonterra has just released its first quarter update. Photo / File.

Fonterra has just released its first quarter update. Photo / File.

Fonterra has lifted its farmgate milk price to $7.30 a kg, which would be the fourth-highest price in its history, and has raised its earnings in the first quarter.

The forecast range has shifted up to $7.00 to $7.60 per kg, up from a previous forecast range of $6.55 to $7.55 per kg, and lifting the mid-point by 25c to $7.30/kg.

The co-op said the higher milk price would put downward pressure on its earnings.

Nevertheless, Fonterra retained its previous earnings per share range forecast of 15 to 25 cents for the current 2019/20 year.

For the first quarter, Fonterra said it had generated normalised earnings before interest and tax (EBIT) of $171m, up $145m, and a reported EBIT of $259m, up $233m.

Advertisement
Advertise with NZME.
Advertisement
Advertise with NZME.

In September, Fonterra reported a net loss of $605m, its biggest ever, for the 2018/19 year to July 31.

READ MORE:
• Fonterra's plan for a $1b Indian business
• Shrinking NZ milk pool plays into Fonterra's hands – Hurrell
• Fonterra rivals fear dairy giant will get leg up from law overhaul
• Fonterra report concedes palm kernel imports reverse emissions progress

Milk prices are Fonterra's biggest input cost and high prices can put pressure on its margins.

Advertisement
Advertise with NZME.

Fonterra has, from time to time, adjusted the milk price - which is calculated using a mixture of reference products traded on the Global Dairy Trade platform.

In the 2013-14 season the theoretical Farmgate Milk Price was $8.93/kg MS, but Fonterra actually paid its suppliers only $8.40/kg MS that season.

Chief executive Miles Hurrell said that from that perspective, Fonterra was comfortable with the new, higher, range.

"We are still very comfortable with our range," he said on a conference call for journalists.

Discover more

Business

Jarden tells Fonterra: keep dumping non-core assets

09 Dec 08:54 PM

"It's only the first quarter, so we need to take the higher milk price as one of the cogs and understand the impact that it will have on our consumer and foodservice markets in particular, to see at what point the demand comes away," he said.

Since the end of the last financial year, Fonterra said it had:

- Improved the underlying financial performance of the business, delivering a gross margin of $740m, up from $646m.

- Reduced operating expenditure by $104m.

- Generated a normalised EBIT of $171m, up $145m, and a reported EBIT of $259 million, up $233 million.

- Improved free cash flow by $595 million compared to last year.

Advertisement
Advertise with NZME.

Chairman John Monaghan said the Co-op had continued to earn good prices for its milk, reflecting slightly higher demand.

Fonterra's milk production was forecast to be up 0.5 per cent on last year.

Annual milk production in the other key global supply regions of the United States and the EU were both growing at less than 1 per cent.

"On the demand side, Global Dairy Trade prices have increased by about 6 per cent since our previous forecast," he said.

Whole milk powder prices - a key driver of the milk price - were at their highest level since December 2016.

Hurrell said the co-operative had made good progress moving to its new strategy and had had a strong first quarter.

Advertisement
Advertise with NZME.

The focus remained on reducing debt to no more than 3.75 times earnings.

"This will require us to achieve a gross margin of $3 billion, further reduce operating expenditure, lower capital expenditure by $100m to $500m, and also divest some more assets," he said.

Fonterra expects there to be several one-off adjustments, such as divestments of assets, that will impact reported earnings for the year.

Its reported EBIT in the first quarter included positive one-off items such as the proceeds from the sale of its interest in foodspring and the revaluation of Beingmate shares.

During Q1, Fonterra's Ingredients business increased its EBIT by $32 million to $139 million.

EBIT from the Consumer and Foodservice business was $118 million in the first quarter, up by $56 million compared to the same period last year, with improvements across all regions.

Advertisement
Advertise with NZME.

"The Australia Consumer business has delivered record market share in the chilled spreads category, and we are starting to see early signs of a turnaround in our New Zealand Consumer business," Hurrell said.

"The lift in China Foodservice sales in the fourth quarter of last year has continued into the first quarter of the year".

Sales volumes in China were up 43 per cent and gross margins were up $23m in the first quarter on a year-on-year basis.

Fonterra's NZX-traded units last traded at $4.08, up six cents from Wednesday's close, and up from their record low $3.15, set in August this year.

Save

    Share this article

Latest from Business

Premium
Media Insider

TV shake-up: Sky TV set to lose channels - viewers 'don't like repeats'

05 Jul 09:46 AM
Business|companies

Entrepreneur Bowen Pan on why he returned to NZ

Premium
Business|companies

Silicon Valley to NZ: Kiwi Facebook Marketplace inventor is back home to give back

05 Jul 12:00 AM

Audi offers a sporty spin on city driving with the A3 Sportback and S3 Sportback

sponsored
Advertisement
Advertise with NZME.

Latest from Business

Premium
TV shake-up: Sky TV set to lose channels - viewers 'don't like repeats'

TV shake-up: Sky TV set to lose channels - viewers 'don't like repeats'

05 Jul 09:46 AM

A major global deal is coming to an end for Sky. What does that mean for customers?

Entrepreneur Bowen Pan on why he returned to NZ

Entrepreneur Bowen Pan on why he returned to NZ

Premium
Silicon Valley to NZ: Kiwi Facebook Marketplace inventor is back home to give back

Silicon Valley to NZ: Kiwi Facebook Marketplace inventor is back home to give back

05 Jul 12:00 AM
Premium
Bruce Cotterill: Is our bloated bureaucracy hindering economic growth?

Bruce Cotterill: Is our bloated bureaucracy hindering economic growth?

04 Jul 11:00 PM
Gold demand soars amid global turmoil
sponsored

Gold demand soars amid global turmoil

NZ Herald
  • About NZ Herald
  • Meet the journalists
  • Newsletters
  • Classifieds
  • Help & support
  • Contact us
  • House rules
  • Privacy Policy
  • Terms of use
  • Competition terms & conditions
  • Our use of AI
Subscriber Services
  • NZ Herald e-editions
  • Daily puzzles & quizzes
  • Manage your digital subscription
  • Manage your print subscription
  • Subscribe to the NZ Herald newspaper
  • Subscribe to Herald Premium
  • Gift a subscription
  • Subscriber FAQs
  • Subscription terms & conditions
  • Promotions and subscriber benefits
NZME Network
  • The New Zealand Herald
  • The Northland Age
  • The Northern Advocate
  • Waikato Herald
  • Bay of Plenty Times
  • Rotorua Daily Post
  • Hawke's Bay Today
  • Whanganui Chronicle
  • Viva
  • NZ Listener
  • Newstalk ZB
  • BusinessDesk
  • OneRoof
  • Driven Car Guide
  • iHeart Radio
  • Restaurant Hub
NZME
  • About NZME
  • NZME careers
  • Advertise with NZME
  • Digital self-service advertising
  • Book your classified ad
  • Photo sales
  • NZME Events
  • © Copyright 2025 NZME Publishing Limited
TOP