New Zealand dairy giant Fonterra Co-operative Group has posted a 13% increase in its half-year revenues to NZ$7.3bn (US$5.68bn) on the back of record commodity prices and improved ingredients and branded dairy products sales.
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Fonterra said it closed the six-month period to 30 November 2007 with $4.5bn available for payout to suppliers, against $2bn in the comparable period in 2006.
Chairman Henry van der Heyden said the result reflected higher prevailing prices in a market where supply had been tight, as well as good performances across the whole Fonterra business.
“The selling prices achieved in the first half more than offset the higher average exchange rate of 75 cents,” he said. “At the same time, we continue to see steady increases in the returns from our equity investments.”
Van der Heyden said returns from equity investments, excluding royalties, were up by $46m to $72m for the six months, with the majority of the increase coming from the performance of DMV Fonterra Excipients. Other investments including Arla Fonterra Foods, San Lu and DPA also contributed in line with expectations, he added.
Despite cold wet conditions in some North Island regions ahead of the peak, Fonterra’s suppliers achieved a 2.5% increase in production over the same period last season, Fonterra stated.
Higher milk prices meant Fonterra’s total cost of goods sold, including payout to suppliers, was $1bn ahead of the comparable period at $6.4bn. However, total operating expenses, which include sales and marketing, administration and other operating costs, fell to $841m, from $860m in the previous half-year.
Fonterra CEO Andrew Ferrier said that while the high commodity prices had put pressure on margins in the ingredients and consumer brands businesses, both parts of the business were performing ahead of expectations.
Ferrier added that the co-operative’s overall performance in the first half left it well placed ahead of the anticipated softening of prices signalled in December following global production increases, notably in the US.
Ferrier said: “We are well positioned having completed our first half of the year with $2.5bn more available for payout and while prices are easing somewhat as supply increases in response to these higher prices, we do not anticipate there will be any sharp falls given the overall strength of the market and other factors such as the demand for grain and its use in biofuels.”
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