Fonterra announces big profit


Fonterra has announced a big rise in profit.

The co-operative's after-tax profit for the 2015/16 financial year was $834 million.

That is 65 percent higher than last year's net profit of $506 million.

The final cash payout to farmers for the season will be $4.30. That comprises a Farmgate Milk Price of $3.90 and a dividend of 40 cents per share.

It generated revenue of $17.2 billion.

Chairman John Wilson said the 2015/16 season had been incredibly difficult for farmers, their families and rural communities, with global dairy prices at unsustainable levels.

"We have done what we can to support our farmers with the Co-operative Support Loan, and early payment of dividends."

But he said the co-operative had responded.

"Our business strategy is serving us well. We are moving more milk into higher-returning consumer and foodservice products."

In the consumer and foodservice area, known as value added products, earnings before interest and tax had grown by 42 percent.

Chief executive Theo Spierings said more volumes of milk sold at higher value is at the heart of Fonterra’s strategy.

"For our farmers, the promise is that we will make the most of their milk. We're keeping that promise."

The final payout for last season is below the average break-even point for Fonterra's 10,500 farmers.

But the prospects are looking better for the current season. Yesterday Fonterra lifted its forecast payout by 50 cents to $5.25 per kilogram of milk solids.

It is also forecasting earnings per share for the current financial year between 50 and 60 cents.

That would mean a total payout available to farmers in the current season of between $5.75 to $5.85, before retentions.

Dairy New Zealand estimates the average break-even point this season is $5.05.

Fonterra chairman John Wilson said that since the co-operative last reviewed its forecasts in August, the "global milk supply has continued to reduce and demand has remained stable".

"Milk production in key dairying regions globally is reducing in response to low milk prices. Milk production in the EU for 2016 is beginning to flatten out and our New Zealand milk collection is currently more than 3 percent lower than last season."

But Fonterra says the high New Zealand dollar remains a problem.

Mr Wilson said "while we have seen some improvement in GDT auction prices recently, the high New Zealand dollar-US dollar exchange rate is offsetting some of these gains".


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