Fonterra Co-operative Group Limited reports a solid start to the 2021 financial year.
CEO of Fonterra, Miles Hurrell says as a result of strong demand for New Zealand dairy, the Co-op has narrowed and lifted the bottom end of the forecast Farmgate Milk Price range.
The price range is from NZD $6.30 – $7.30 per kgMS to NZD $6.70 – $7.30 kgMS.
“This means the midpoint of the range, which farmers are paid off, has increased to NZD $7.00 per kgMS.
“China is continuing to recover well from Covid-19 and this is reflected in recent Global Dairy Trade (GDT) auctions with strong demand from Chinese buyers, especially for Whole Milk Powder, which is a key driver of the milk price.
“However, we have contracted a good proportion of our sales book for this time of the season, which has given us the confidence to narrow and lift the bottom end of the forecast Farmgate Milk Price range.
“Our forecasts would see the Co-op contribute around NZD $10.5 billion to the New Zealand economy this year.”
First quarter business results
Mr Hurrell says Fonterra delivered a total Group normalised Earnings Before Interest and Tax (EBIT) of NZD $250 million, up NZD $72 million on last year.
“We’ve seen improvements right across our business, which has resulted in a 40% increase in our normalised earnings.
“There’s been a couple of exceptions to this – Europe, which has been impacted by higher costs, and Africa, which has been impacted by lower volumes as we have shifted product to meet strong demand across Asia.”
Mr Hurrell adds: “We continue to divest non-core assets with the announcement that we’ve agreed to sell our China Farms for NZD $555 million, which will further reduce debt.
“The sale of this asset reinforces our strategy of prioritising New Zealand milk.”