Fonterra Co-operative Group has announced its half-year results. Chairman John Wilson said that given the results achieved in the first half of the year and the continued volatility in international prices, the Co-operative was holding its forecast Farmgate Milk Price at $4.70 per kgMS.
“However, our forecast dividend has been lowered to 20-30 cents per share, resulting in a forecast Cash Payout of $4.90 – $5.00. The Board has declared a 10 cent interim dividend.
“These half-year results are below our farmers’ expectations, in a period when the Farmgate Milk Price is low and we are reducing the forecast dividend range.
“Our half-year results are a snapshot of tough conditions in dairy with variable production, demand and pricing. There was also the challenge of generating profit from inventory made in the previous financial year when the cost of milk was higher, but sold in the first quarter of the financial year when global dairy prices were falling.
“In New Zealand, milk production got off to an excellent start. A very dry summer in most regions curtailed production in the last three weeks of January, with the Co-operative reducing its milk volume forecast to slightly below last season’s production.
“Our current milk supply forecast for the 2014/15 season has increased to 1,551 million kgMS, two per cent below the 2013/14 season.
“Oversupply from dairy producing regions around the world in the early months of the financial year saw the trade-weighted GlobalDairyTrade price index hit a five-year low in December. Supply outweighed demand and buyers undervalued milk, which was reflected in prices that declined to unsustainable levels. Lower commodity prices placed downward pressure on our Farmgate Milk Price in the first half. This was partially offset by currency, with a benefit of approximately 30 cents per kgMS to the forecast Farmgate Milk Price, as at 31 January.
“Volatility continues to influence international dairy commodity prices and given this, we recommend caution with regards to on-farm budgets,” said Mr Wilson.
Net profit after tax is down 16 per cent to $183 million. Normalised EBIT is also down 7 per cent to $376 million, compared with the same period last year.
In terms of business performance, the first half has been subdued for the Co-operative, due to high volatility and challenging global market conditions, resulting in a 14 per cent decrease in revenue, CEO Theo Spierings said.
Results Highlights
- Forecast Cash Payout for the 2014/15 Season of $4.90 – $5.00
* Forecast Farmgate Milk Price $4.70 per kgMS
* Estimated full year dividend of 20-30 cents per share
- Revenue $9.7 billion, down 14 per cent
- Reported EBIT $483 million, up 16 per cent
- Normalised EBIT $376 million, down 7 per cent
- Net profit after tax (NPAT) $183 million, down 16 per cent
- Interim dividend of 10 cents per share
- Ingredients normalised EBIT $299 million, up 2 per cent
- Consumer and foodservice normalised EBIT $116 million, up 23 per cent
- International Farming normalised EBIT ($27) million
