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February 27, 2020

Fonterra maintains earnings forecast but coronavirus still a threat

Fonterra said it could feel the impact of the coronavirus outbreak in China on its foodservice division but is maintaining its earnings outlook.

By Dean Best

Fonterra said it could feel the impact of the coronavirus outbreak in China on its foodservice division, but for the time being, the world’s largest dairy cooperative is maintaining its full-year earnings guidance.

Chief executive Miles Hurrell said the outlook for underlying earnings per share for the New Zealand-based co-op will stay at 15 to 25 cents, “despite current market conditions as a result of coronavirus”. 

“In China, people continue to face movement restrictions due to the outbreak. This means many restaurants and food outlets are closed, which is having a major impact on the operations of our foodservice customers,” Hurrell said in a statement. “Our sales teams are working with these customers to help them where they can.”

Meanwhile, the CEO indicated the company is taking a cautious approach on the potential impact of coronavirus as the business momentum seen in the first quarter continues, “and as we approach the interim results our underlying earnings are tracking well”, Hurrell added. Nevertheless, traffic at China’s major ports is slowing down as a result of the outbreak, he noted.

“However, given the potential significant risks that could arise from coronavirus in the second half, we are taking a prudent approach and maintaining our full-year forecast earnings range. The current situation is very fluid and uncertain. However, we have already contracted a high percentage of our 2020 financial year’s milk supply and this is helping us manage the impact of coronavirus. 

“Our Greater China team are working hard to keep our operations running as smoothly as possible. Without them this would not have been possible and I want to thank them for their efforts. There has been a slowdown in processing of containers at ports and we are managing the flow of our product into China carefully to avoid congestion. Currently, our product is continuing to be cleared by customs and quarantine officials.” 

Fonterra said it will update markets on coronavirus when it publishes its interim result on 18 March. 

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