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Record profits for Fonterra

Record profits for Fonterra
Miles Hurrell says Fonterra will continue to do all it can to support farmers facing low farmgate prices this coming season.

Fonterra's profit has jumped 170% on last year and is paying record dividends to its shareholders.

The dairy giant's profit for the financial year to the end of July was a record $1.58 billion.

Chief executive Miles Hurrell said favourable margins for its ingredients portfolio - particularly casein and cheese - drove the jump in profits, while the global demand for milk powder and fats was weak.

“We can very quickly move products into channels and markets where there was a better value and we're seeing that play out this year," he said.

Fonterra set its milk price for last season at $8.22 per kg of milk solids (kgms), up 2c from its previous mid-point price.

The co-operative's farmers will also receive a full year dividend of 50c/share in addition to a 50c/share following the divestment of its business in Chile.

Hurrell said this was an "effective final cash pay-out to farmers of $9.22 per share backed kgms".

However, Fonterra has left the current season's forecast milk price between $6.00 and $7.50/kgms with a midpoint of $6.75 which it said reflected the reduced demand for whole milk powder from key importing regions.

Hurrell said farmers would continue to feel the pressure from high input costs and a reduced farm gate milk price with the mid-point pay out below breakeven for some farmers.

"We'll continue to do all that we can to support farmers through this challenging period," he said.

Fonterra said it saw indications that the demand for New Zealand milk powders could return from early 2024, while demand for other products, including foodservice and our value-added Ingredients, continued to be robust.

The co-op has a forecast dividend range or 45-60 cents per share for the 2024 financial year on the back of improved margins for its consumer and foodservice channels.

By the numbers:

Net profit $1.58b, up from $583m last year

Profit from continuing operations $1.54b up from $752m

Return on Capital of 12.4%, up from 6.8%

Full year milk collection of 1480-million kgms

by Sharon Davis