Fonterra said today (22 September) its strategy to focus on higher-value products is paying off as it delivered a 65% jump in annual net profit.
The cooperative’s net profit rose to NZD834m (US$612.4m) in the year to 31 July, versus NZD506m in the prior year. Bottom-line growth was supported by a 4% reduction in financing costs as Fonterra paid down debt as well as an improved operating performance.
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Normalised EBIT rose 39% to NZD1.36bn. This represents a return to pre-2013/14 levels when Fonterra’s profit plunged in the wake of the recall of concentrated whey powder that was thought to be contaminated with a botulism-causing bacteria.
CEO Theo Spierings said moving milk provided by Fonterra’s farmer-owners up the value chain was at the heart of the company’s strategy. Management has also focused on reducing its cost base and this helped boost margins, Spierings added. “Our results show that we continue to do what we said we would do right across the co-op. We are single-minded about transforming our business to get the best results. We have cut our operating expenses, increased our free cash flow, reduced our working capital days, driven debt down, and reduced our capex and our gearing,” he commented.
While Fonterra increased its milk volumes, which rose 4% to 23.7bn liquid milk equivalents, the company’s net revenue dropped. Sales value declined 9% to NZD17.9bn, Fonterra revealed.
The cooperative is paying a cash payout of NZD4.30 for the 2016 season for a 100% share-backed farmer, comprising a farmgate milk price of NZD3.90 per kilogram of milk solids and a dividend of 40 cents per share.
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