Fonterra, the world’s largest dairy exporter, has reported what it said was its first-ever profit for the first half of a financial year, on the back of a 21% jump in revenue.
The New Zealand co-operative yesterday (22 March) posted net profit after tax of NZ$293m (US$217m), or NZ$0.21 a share to its members.
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Revenue reached $9.4bn, which Fonterra said reflected the impact of “higher international dairy prices”. The company said, however, that it had seen a “slight decline” in sales volumes.
The results meant Fonterra confirmed its current payout forecast of NZ$7.90-8.00 before retentions for the 2010/11 season.
For co-op members who are “100% shared up”, they stand to receive $7.75-7.80 in cash, which is made up of the Fonterra milk price plus dividend.
Chairman Sir Henry van der Heyden said current dairy prices were being boosted by demand in Asia and poor weather hitting supply.
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By GlobalData“We are benefitting from a combination of demand growth from China and other Asian markets, and tighter international supply due to adverse weather conditions in many parts of the world,” he said. “To date, these higher prices have more than offset the negative effects of a stronger New Zealand dollar against the US dollar, in which most international dairy sales are denominated.”
However, van der Heyden sounded a note of caution. “We must be mindful of the impact that dairy prices can have on demand in some markets, as well as on supply growth around the world. As prices continue to climb, the possibility of a downward correction can increase and farmers should always need to be prepared for a potential global price drop.”
Fonterra CEO Andrew Ferrier, who said earlier this month that he would step down later this year after eight years in the post, also warned that the rising milk price was putting pressure on the company’s operating earnings.
“This margin squeeze is particularly significant in our ingredients businesses where the cost of raw milk represents a substantial proportion of total operating costs. Thanks to our strategy of building leading brand positions in key categories, our consumer businesses are better placed to withstand price increases – but they are not immune,” Ferrier said.
Click here for the full earnings report from Fonterra.
