Third-quarter Fonterra profits show co-op on 'home straight' of 'reset' after big loss last year

Fonterra chief executive Miles Hurrell.
Fonterra chief executive Miles Hurrell. Photo credit: Supplied

Fonterra's chief executive says the co-op's third-quarter earnings show a "reset" at the dairy giant is on the "home straight".

On Thursday the co-op reported a profit of $815 million before tax in the nine months to April 30, up $301 million on the same period last year.

The profits came after Fonterra posted a net loss of $605 million last year to the end of July, and a $196 million loss the year before.

The losses sparked a number of asset sales and prompted a "reset" at the co-op.

"I'd like to think we're on the home straight of that significant reset," chief executive Miles Hurrell told reporters on Thursday. 

"We are making some very good progress, and you've seen that play out in this third quarter - whereby we've been able to weather the storm of COVID pretty well at this point."

In announcing the update earlier on Thursday, Hurrell said work done over the past year had strengthened Fonterra's balance sheet and allowed it to respond quickly to the challenges posed by COVID-19.

"We’re drawing on our global supply chain and diverse product and customer base to minimise disruptions for our customers and our business," he said.

With many businesses announcing redundancies in the wake of COVID-19, Hurrell told reporters that no such moves were being considered by the company. 

"At this point in time we have no intention of reducing or changing staff numbers," he said. "Our business has continued to operate at 100 percent through COVID on a global basis, and the ability for us to collect, process, distribute and sell milk has been a real strength of ours, so we have no intention of making any staff changes."

Despite the improved performance, Hurrell emphasised that much work remained to be done.

"Our job is to continue to evolve the co-op. COVID will throw up some new challenges and new opportunities - our job is to make sure we're at the forefront of understanding what those look like and put our co-op in the best position to take advantage of them."

In Thursday's business update, the co-op also narrowed the range of its 2019/2020 farmgate milk price forecast and gave an opening forecast for the 2020/2021 season.

The 2019/2020 range was narrowed to 7.10 - $7.30 per kgMS, with a mid-point of $7.20 per kgMS.

Uncertainty caused by COVID-19 led to a lower forecast for next season, with the co-op setting a range of $5.40 - $6.90 per kgMS, with the advance rate set at the mid-point of $6.15 per kgMS.

Fonterra will contribute about $11 billion to the New Zealand economy through milk price this year, Hurrell said.

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