Fonterra's Q3 results down to team work says Fraser Whineray

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A great deal of team work went into Fonterra's impressive Q3 results, chief operating officer Fraser Whineray says.

"[There was] a lot of effort collectively on-farm, off-farm and overseas to deliver those products and get them through to the customers," he told The Country Sport Breakfast's Brian Kelly.

While many people had faced challenges from Covid-19, Fonterra wanted to acknowledge the efforts of it's non-Australasian teams, who were "not quite enjoying the downunder bubble," Whineray said.

The co-op was pleased with the numbers that came out for Q3, as they reflected "better underlying business performance and a stronger balance sheet," Whineray said.

Fonterra lifted its earnings for the first nine months of its financial year and set its opening milk price forecast range for next season at $7.25 - $8.75 per kgMS, with a midpoint of $8 per kg.

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A milk price at that level would contribute $12 billion to the New Zealand economy, which was also good for the co-op, Whineray said.

"One of the great things about that, is it goes right across all of the provinces where our farmers and our people are – so it's distributed across New Zealand."

China was "leading the charge" of a strong global demand for dairy, as people looked for the health benefits of milk, Whineray said.

However, there were "quite a lot of risks" over the next 18 months, due to the continuing effects of Covid-19 on economies and buying patterns, Whineray said.

"So that's why there's a broad range on that forecast for the farmgate milk price as well."

Meanwhile, Fonterra had sold most of its milk for the season, so had narrowed its 2020/21 forecast milk price range, which reduced the midpoint by 5 cents to $7.55 per kg, Whineray said.

"This season will be the second year in a row with the forecast farmgate milk price above $7 so we're pretty happy about that."

Whineray said the co-op was also aware there would be "significant pressure" on its earnings in the last quarter.

"That's because [of the] normal seasonal profile of the business, with lower production in the last quarter, as well as the tightening margins with that milk price coming up underneath it," he explained.

Finally, the co-op had a strong focus on shipping, illustrated by a load record at the Port of Tauranga last week, Whineray said.

A record lift of 5326 TEU (twenty foot equivalent) containers, as well as a record 1914 refrigerated boxes, was loaded onto the Maersk Shams, including "a lot of specialty products" from Fonterra, Whineray said.

"That's about close to $400 million over the rail of the vessel."

Whineray wanted to acknowledge those involved at Kotahi and the Port of Tauranga and Maersk, "given the very complex domestic and international logistics situation we found ourselves in."