Fonterra has said its profits sank by 53% in the first six months of its financial year as consumer and foodservice margins were squeezed by higher dairy commodity prices.
Net profit in the six months to 31 January totalled NZ$403m (US$186m). Normalised EBIT dropped 41% to NZ$403m.
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Profits were down despite a 21% rise in revenue, which climbed to NZ$11.3bn.
The company said that its earnings were hit by higher input costs and product mix issues. CEO Theo Spierings said: “Higher dairy commodity prices have put increasing pressure on margins in our consumer and foodservice businesses. We had to strike a balance between passing on rising costs immediately or continuing to build our market presence to secure long term growth.
Spierings said the group collected “record” milk volumes in the October-November “peak” period but was unable to channel all of this into higher margin milk powder products. “Our current asset footprint meant that around 25% had to be processed into cheese, casein and other non-reference commodity products which earned negative returns over the period,” he said.
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