Fonterra Co-operative Group Ltd has unveiled its robust interim results for FY24, showcasing a notable surge in profits and dividends.
The company reported a profit after tax of NZ $674 million, marking a remarkable 23% increase from the previous year. Continuing operations also saw a substantial uptick, with EBIT hitting NZ $986 million, a notable 14% rise. This translates to an earnings per share of 40 cents and a return on capital of 13.4%, up from 8.6%.
CEO Miles Hurrell attributes this success to higher margins and increased sales volumes across Fonterra's diverse product range. Hurrell expressed his satisfaction with the positive momentum in earnings, highlighting the interim dividend of 15 cents per share for Co-op’s farmer shareholders and unit holders, a significant boost from the 10 cents distributed the previous year.
The forecast Farmgate Milk Price has also seen an upward trend, currently sitting at a midpoint of $7.80 per kgMS. Despite global uncertainties, Fonterra remains optimistic, narrowing the forecast Farmgate Milk Price range to $7.50 - $8.10 per kgMS and maintaining the earnings guidance for the year at 50-65 cents per share.
The stellar earnings performance has been underpinned by higher margins and sales volumes in Fonterra's Foodservice and Consumer channels, offsetting lower returns in the Ingredients channel. Sales volumes from continuing operations saw a 1.3% increase, reaching 1,721kMT, with gross margins rising from 16.6% to 18.4%.
However, the company faced challenges in certain regions, with Fonterra Australia impacted by a higher Australian milk price. Nevertheless, the Co-op remains focused on leveraging scale efficiencies, as demonstrated by the planned merger of its Australia and Fonterra Brands New Zealand businesses.
Fonterra's commitment to sustainability is also evident, with initiatives to commercialise farmers’ sustainability credentials and reduce carbon emissions. The company has made strides in decarbonising its operations, including the commissioning of a wood biomass boiler and plans to electrify a 20-megawatt boiler at its Edendale site.
Looking ahead, while global inflationary pressures are subsiding, potential volatility stemming from geopolitical instability remains a concern. Nonetheless, Fonterra's partnership with Kotahi and market diversification positions it well to navigate disruptions in global supply chains.
