News Annual figures
Significant profit increase for Fonterra despite corona
Fonterra has managed to realize a significant increase in profit for the 2019/2020 financial year. The profit is $659 million, more than $1,3 billion more than last year, according to the annual figures published by the New Zealand dairy today (September 18).
"Last year was a good year for us with higher profits, lower debt and a good milk price," said CEO Miles Hurell. A very different picture than last year, when the dairy cooperative had to take a loss of $605 million. The loss was in response to several accounting adjustments caused in part by the new 'three-point plan' that Fonterra introduced in 2018.
The company now appears to be heading in the right direction with the new strategy. Profits rose sharply to $659 million and EBIT (earnings before interest and tax) jumped sharply from $1,2 billion to a total of $1,1 billion. In addition, the company has managed to reduce debt by 1,1 billion (-19%) compared to last year.
Strong milk price
The milk money of the past financial year also did not disappoint compared to the year before. The final milk price is $7,14 per kilo of milk solids (converted about €4,08 per 11,5 liters of milk), a small dollar more than last year. The paid-out price is $7,19 per kilo of milk solids, including a $0,05 dividend per share.
John Monaghan, chairman of the cooperative, says he is pleased that the dividend has been paid out again. “At $0,05 per share, the dividend is at the lower end of the 5–7 cent range calculated under the Board's dividend policy guidelines, but we are pleased to be able to pay dividends again. we would like to hold on to it for the future.” Last year Fonterra decided not to pay a dividend due to the substantial loss.
Success requires adaptation
Despite the fact that the year was split into 2 parts because of corona, all 4 priorities have been achieved, according to Hurrell. The company has contributed to the local New Zealand market, has worked on the team within the company, Fonterra has reduced its environmental footprint and the company has achieved its key financial objectives.
For the latter, Fonterra explains that earnings of $0,24 per share have been normalized. In addition, Total Group realized a gross profit of $3,2 billion. Expenses have been reduced by $181 million and debt has been reduced by $1,1 billion, improving the debt to EBITDA ratio to 3,4 times revenues from 4,4 times.
Future
For next fiscal year, Fonterra wants to maintain an earnings guidance of $0,20 - $0,35 per share. The milk price range of $5,90 to $6,90 per kilo of milk solids remains with an average milk price forecast of $6,40 per kilo of milk solids. Despite the corona crisis, chairman Monaghan expects supply and demand in the dairy industry to remain in balance. For that reason, they continue to keep track of the previously released milk price forecast.
For the rest of the year, the cooperative will stick to its current strategy and focus on maintaining control within the company. This includes continuing to collect and process the milk, serving customers and keeping the company financially healthy. According to Monaghan, that is the best way to deal with the uncertainties of the corona crisis.
Jorine Cosse
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