Members benefit from strong result Fonterra

Fonterra's profit in the past broken financial year (ending in July) remained virtually the same as last year. Turnover did increase considerably, which is a logical consequence of the increased dairy prices worldwide. The members of the New Zealand cooperative benefit from what they say is a strong result through a milk price that has never been higher.

Sales rose 11% to NZ $23,4 billion. Converted this equates to €13,8 billion. Normalized profit increased by 1% to converted €350 million. Based on the rapidly rising dairy prices, a higher turnover increase would be likely, but the sales volumes were lower. This is partly due to the fact that the milk supply, with a decrease of 4%, turned out to be a small jacket.

Fonterra's top management is pleased that profits have remained stable, despite the volatility in the dairy market and the rapidly increasing costs in the chain. In their own words, this is due to the strong chain and a good product mix.

Record high milk price
The member dairy farmers benefit from a record high milk price of $9,50 per kilo of milk solids, including dividend. By Dutch standards, this comes down to a milk price well above €40 per 100 kilos. The high milk price is good for the economy in New Zealand, where Fonterra is the largest company. Based on the milk price, NZ $13,7 billion flows into the economy.

Australian division not divested after all
In its strategy, Fonterra tries to focus more on the valorisation of New Zealand milk. As such, they intend to divest the Chilean operations. The division in Australia will remain fully in our own hands. The cooperative previously considered partially divesting this branch. In March Fonterra also decided to stop a joint venture in Russia, because of the war in Ukraine.

Fonterra is positive about the current season. The milk price forecast is in line with last season. The dairy market is currently in a solid position. However, there are concerns about the unrest in Sri Lanka and lockdowns in China, both important markets for the largest dairy exporter in the world.

Wouter Job

Wouter Baan is editor-in-chief of Boerenbusiness. He also focuses on dairy, pig and meat markets. He also follows (business) developments within agribusiness and interviews CEOs and policymakers.

w.baan@boerenbusiness. Nl

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