Dairy co-operative Fonterra has executed a recovery with a record $1.6 billion profit. But milk product demand is declining in China and farmers are facing financial pressure.
Demand for New Zealand milk products has fallen by 11.2 per cent in China in the past year, forcing our biggest agri-exporter Fonterra to cut the carrying value of its Asia business by $101m - but it’s still bullish on the east.
Chief financial officer Neil Beaumont told Markets withMadison the performance of its Asia brands was “a little bit disappointing”.
But: “We continue to like that market and it continues to be a great market for us, even though there’s been some negative headlines and sentiment.”
Those headlines including China’s birth rate hitting a record low seem bearish for a co-operative that sells infant formula.
“It’s a market that we’ll continue to be focused on.”
The chiefs alongside chairman Peter McBride were constraining grins when they revealed a record $1.6 billion annual profit on Thursday. They’ve executed an epic turnaround by selling off non-strategic assets and paying down billions of dollars of debt since the dark days of 2019.
Bad vibes in 2019 when the co-op was in the doldrums. Pictured: Then-CFO Marc Rivers (left), then-Chairman John Monaghan (centre) and freshly appointed CEO Miles Hurrell. Photo / Dean Purcell
They were keeping a lid on celebrations this week because they knew some of their 8000 dairy farmer-shareholders may not breakeven on a lower forecast milk price payout this season.
“We don’t get too excited,” Hurrell said.
Watch Hurrell and Beaumont discuss Fonterra’s record recovery in today’s episode of Markets with Madison above.
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Stake is the proud sponsor of Markets with Madison. Stake your claim today at HelloStake.com.Madison Reidy is the host of New Zealand’s only financial markets show Markets with Madison. She joined the Herald in 2022 after working in investment, and has covered business and economics for television and radio broadcasters.
