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7 Dairy focus in India questioned Vol 20 No 37, September 26, 2022
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Fonterra confirms a record year Hugh Stringleman
NEWS
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Fonterra
ONTERRA filed a strong set of results for the 2022 financial year to stay on strategy to achieve its own targets for 2030. Dairy farmers should be delighted: the co-operative delivered a record $9.30/ kg farmgate milk price and maintained profitability on par with FY21. It delivered earnings per share of 35c, right at the top end of a 25c to 35c guidance range. The total dividend of 20c a share means farmers received $9.50, $1 more than ever before. Dividend, earnings and profit were all similar to FY21, in itself a performance achievement given the very high milk input costs for value-add products in Foodservice and Consumer goods. Early in the new season, Fonterra is forecasting a repeat performance in FY23, including a $9.25 midpoint farmgate milk price and 45 to 60c a share normalised earnings. In what was otherwise a predictable profitable result, two surprises were the $1 billion increase in net debt and the renewed intention to keep Fonterra Australia intact and in full New Zealand ownership.
The possible balance sheet effects of both were outlined by chief executive Miles Hurrell, who said the short-term increase in working capital should unwind as large inventory increases at balance date are sold. Late-season milk, factory constraints and shipping disruption caused delays, he said. But without any proceeds from an Australian full or partial selldown, Fonterra’s promise of $1b capital return to shareholders by FY24 has been compromised. “Australian plays an important role in our consumer strategy with common and complementary brands and products as a destination for NZ milksolids,” Hurrell said. “The business is going well and it will play a key role in helping us to get to our 2030 strategic targets.” The sale process for Soprole in Chile is progressing and the outcome, plus the debt and earnings levels, will determine the amount of any capital return, Hurrell said. Two and a half years into his tenure as chief executive, Hurrell said it is still early days in the shift from reset to growth. “We made good progress in implementing our strategy to increase the value of every drop of milk and deliver higher returns.”
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^T’s & C’s apply