Friday, March 29, 2024

Strong annual result from Fonterra

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Fonterra has posted a strong result for the 2021 financial year with normalised profit after tax at $588 million, up $190 million from the previous year. Its final milk price for the 2020-2021 season is $7.54/kg milksolids with a normalised earnings per share of 34 cents and a final dividend of 15 cents, taking the total dividend for the year to 20 cents per share.
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Fonterra has posted a strong result for the 2021 financial year with normalised profit after tax at $588 million, up $190 million from the previous year.

Its final milk price for the 2020-2021 season is $7.54/kg milksolids with a normalised earnings per share of 34 cents and a final dividend of 15 cents, taking the total dividend for the year to 20 cents per share.

For a 100% share-backed farm, this means a total pay-out of $7.74/kg MS.

Fonterra also announced earnings guidance range of 25-40 cents per share and reaffirmed its 2021-2022 milk price forecast of $7.25-$8.75 per kgMS, with a midpoint of $8/kg MS.

The results come as Fonterra moves through its buiness reset and into a new phase of growing the value of its business. 

Chief executive Miles Hurrell said the last three years have been about resetting the business.

“We’ve stuck to our strategy of maximising the value of our New Zealand milk, moved to a customer-led operating model and strengthened our balance sheet. 

“The results and total pay-out we’ve announced today show what we can achieve when we focus on quality execution and an aligned co-op. 

“Although the higher milk price and tightening margins put pressure on earnings in the final quarter, this is a strong overall business performance, allowing us to deliver $11.6 billion to the New Zealand economy through the total pay-out to farmers.”

Total group normalised EBIT, which reflects underlying business performance, was up 8% to $952 million, with total group normalised operating expenditure down 3% to $2.2 billion. 

Hurrell said the focus on financial discipline has paid off. Net debt is down by $872 million to $3.8 billion, cashflow has improved and the co-operative was now within its long-term target debt ratio.

Normalised profit after tax grew by $190 million to $588 million, driven by improved earnings and lower interest expense.

“Our sales book is well balanced across the regions and a number of our markets have performed well. In Asia Pacific, significant improvements in our foodservice and consumer channels have pushed normalised EBIT up 28% to $305 million. We’ve expanded our foodservice footprint in the region and are seeing the benefits of that.”

Covid-19 had changed consumer behaviour with people choosing to cook at home, which had benefitted Fonterra’s consumer brands, he said.

“Greater China continues to be an important market for us, with normalised EBIT up 10% to $403 million. This speaks to the strength of our foodservice channel, China’s dynamic economy and its love for dairy.

“Africa, Middle East, Europe, North Asia, Americas’ (AMENA) normalised EBIT was down 28% to $336 million, reflecting our strategy of redirecting product into higher-margin markets.

“However, we have seen improvements in our foodservice and consumer channels within the region, including a turnaround for our Chilean business.”

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