Fonterra Co-operative Group released its 2023 Interim Results which show the co-op has delivered a half year profit after tax of $546 million, an earnings per share of 33 cents, and a decision to pay an interim dividend of 10 cents per share alongside a forecast Farmgate Milk Price range of $8.20 – $8.80 per kgMS.
The Co-op also upgraded its full year forecast normalised earnings from 50-70 cents per share to 55-75 cents per share and announced a proposed tax free capital return to farmer owners and unit holders of around 50 cents per share, subject to completion of the sale of its Chilean Soprole business.
Fonterra CEO Miles Hurrell says the results for the first half of the year show the Co-op is performing well, with profit up 50 per cent, against a backdrop of ongoing market volatility.
“Our Co-op’s scale and diversification across channels and markets has enabled us to navigate through disruption and make the most of favourable market conditions in a number of areas.
“While milk powder prices have softened recently, impacting our forecast Farmgate Milk Price range, protein prices have been high, and this is reflected in the lift in earnings we’re reporting today.
“Our improved earnings and strong balance sheet have enabled us to pay an interim dividend of 10 cents per share which is positive news for our farmer owners and unit holders. We also expect to be able to pay a strong full year dividend, in addition to our proposed capital return.
“The outlook for high quality sustainable New Zealand dairy remains positive. We have a clear strategy and are well-positioned to take advantage of this demand,” says Hurrell.
The Co-op has delivered a Profit After Tax of $546 million, up $182 million compared to the same time last year, and a Return on Capital for the last 12 months of 8.6%, up from 6.1% in the comparable period.
“This lift in earnings is thanks to our Co-op’s scale and ability to move our farmer owners’ milk into products and markets where we’re seeing favourable prices.
“With whole milk powder prices down, we moved more milk into skim milk powder and cream products to optimise our Farmgate Milk Price.
“We also made the most of favourable margins in our cheese and protein portfolios, by moving a higher proportion of current season milk into these products which has benefited our earnings.
“Our ability to capture these higher margins is reflected in our Ingredients channel performance, with normalised EBIT up $494 million, or 118%, on the same time last year to $911 million.
“Our Consumer and Foodservice channels benefited from improved in-market prices, with Foodservice normalised EBIT up $81 million, or 95%, to $166 million. However, higher input costs and ongoing pressure on margins have impacted overall Consumer channel performance.
“Our domestic consumer business, Fonterra Brands New Zealand (FBNZ), has been under margin pressure for some time and is not improving as fast as planned. Performance of our Asia consumer brands has been impacted by weakening currency in the markets they operate, higher interest rates and a declining economic environment in some South East Asian markets.”
