Fonterra reports strong global result but mediocre Australian profits

Posted by AFN Staff Writers on 23rd March 2016

FonterraFonterra has posted strong overall results for the six months ended 31 January 2016 despite a global oversupply of milk driving prices down.

The New Zealand dairy group’s Australian results were however described as “not satisfactory” in its report.

Fonterra made a net profit of NZ$409 million, a 123 per cent increase on the corresponding 2015 period.

Chairman of Fonterra John Wilson said that the company needs to continue its strong performance so it can support its dairy farmers through the tough industry conditions.

“The low prices have placed a great deal of pressure on incomes, farm budgets, and our farming families,” Wilson said.

“Our priority is to generate more value out of every drop of our farmers’ milk by focusing on the areas within our control.  We aim to efficiently convert as much milk as possible into the highest-returning products,” he stated.

Milk solid prices

Fonterra reported its current forecasted milks solid payout to farmers for the season will be between NZ$4.35 and NZ$4.45  per kg. Wilson said this pricing again reflected the low global dairy prices, a factor Chief Executive Theo Spierings further discussed.

“The balance between available dairy exports and imports has been unfavourable for 18 months following European production increasing more than expected and lower imports into China and Russia.  This imbalance is likely to continue in the short term, with prices expected to lift later this calendar year,” said Spierings.

“The long term fundamentals for global dairy are positive with demand expected to increase by two to three per cent a year due to the growing world population, increasing middle classes in Asia, urbanisation and favourable demographics.”

Australian progress

 Fonterra reported that a fire at its Stanhope, Victoria and a in product mix at its Darnum facility from nutritionals to powders took a toll.

The group identified its primary Australian strengths in ingredients as cheese, why and nutritionals, alongside some of its butter, cheese, cream and milk brands.

The group’s total  Australian earningsbefore interest and tax equalled a loss of NZ$28 million.

Fonterra says solid profits will continue

Concluding his remarks, Chairman John Wilson said Fonterra’s solid performance is set to continue.

“The business will continue to work on capturing demand and margins in the second half of the year, just as it did in the first half, by focusing on our consumer and foodservice volumes and those of specialty ingredients,” he said.