Fonterra reported improved margins and lower costs year-on-year

Fonterra reported improved margins and lower costs year-on-year

Fonterra, the world's largest dairy exporter, has lifted its forecast range for earnings per share amid what it called "the ongoing improvement" in its performance.

The New Zealand dairy giant has taken its EPS forecast to NZ$0.45-0.55.

Chairman John Wilson said Fonterra's performance in the three months to 31 October had built on the "strong" second half of the 2014/2015 financial year.

"While it is tough on farm due to low global milk prices, farmers will welcome the ongoing improvement in Fonterra's performance delivering increased returns. Performance is well ahead of last year and we are hitting our targets on gross margins and operating and capital expenses. At the same time, the acceleration of business transformation initiatives is generating significant cash savings, Wilson said. "We are on track, and therefore able to lift our forecast earnings per share range."

Providing more detail omn Fonterra's results in the quarter, the first of its current financial year, CEO Theo Spierings said margins had risen year-on-year from 14% to 23%.

"Our first quarter ingredients performance reflects improved product stream returns and margins are tracking well.  With less milk this season, and additional capacity, we have taken the opportunity to optimise our product mix. We are delivering continuing growth in consumer and foodservice sales volumes and value, particularly in Greater China, Asia and Latin America," Spierings said.

Fonterra revealed its capital expenditure was down 37% at  NZ$258m, in line with its target. Operating expenses dropped 4% to NZ$628m, reflecting what it called a "continuing focus on cost control".

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