New Zealand co-op, Fonterra, has today (Wednesday, September 25) reported a profit after tax from continuing operations of NZ€1.17 billion – down from NZ€1.24 billion a year earlier, in its Full Year (FY) 2024 financial results.
It also reported FY24 earnings before interest and taxes (EBIT) of NZ€1.56 billion with a total dividend of 55 cents per share – the second largest since Fonterra was formed.
Fonterra’s chief executive officer (CEO), Miles Hurrell, said the payout reflected the co-op’s continued strong earnings performance and its long-term resilence.
“The final farmgate milk price for the 2023/24 season finished at NZ$7.83 per kilograms of milk solids (kgMS)
“This, combined with the 55 cents per share dividend, provides a total cash payout to a fully shared up farmer of NZ$8.38 per kgMS.
“Our co-op is in good shape, and I’m pleased to have delivered another year of solid returns to farmer shareholders and unit holders,” Hurrell said.
He said that the FY24 earnings were driven by higher margins and increased sales volumes in its foodservice and consumer channels.
“Our ingredients channel also continued to deliver strong returns, although down when compared to the record result seen in FY23,” the CEO added.
Fonterra
The co-op reported a return on capital for FY24 of 11.3% – above the target range for FY24.
According to its CEO Fonterra’s balance sheet position remains “strong, providing optionality and flexibility for the future and resilience against volatility”.
“We have net debt of NZ$2.6 billion, NZ$600 million lower than last year, due to strong underlying operating performance”, Hurrell added.
The co-op announced back in May that it was looking at divestment options for its global consumer business as well as Fonterra Oceania and Sri Lanka.
Its CEO said today that it has appointed advisors to assess these options and that it is “committed to a pathway that would maximise value of these businesses for our farmer shareholders and unit holders”.
However one key trend identified by Fonterra raises questions about future milk volumes.
The co-op said New Zealand milk collections for the FY2024 were 1,471 million kgMS – down from 1,480 million kgMS in FY2023.
“This is consistent with the trend in New Zealand milk volumes that we expect to continue for the forseeable future.
“Our co-op’s scale is one of its greatest strengths. There would be a significant impact on milk prices if we lost our scale and the cost efficiencies that come with it,” it outlined in its 2024 annual report.
It also warned that its “milk retention teams are competing with one arm tied behind their backs”.
“The co-op needs to think about milk retention differently and be open to giving the team more tools to support win backs and retention,” Fonterra stated.
Because Fonterra purchases such a large proportion of New Zealand’s total milk, there is no market price for milk that is independent of the price paid by Fonterra.
Milk price
Fonterra today also announced a 50 cent lift in its 2024/25 forecast farmgate milk price midpoint to $9.00 per kgMS and FY25 earnings guidance of 40-60 cents per share.
Hurrell said the increase in this season’s forecast farmgate milk price follows further recent strengthening in global dairy trade prices and “constrained milk supply in key producing regions”.
“The forecast earnings range reflects an expectation we will maintain strong margins in all three of our sales channels, while also investing in the co-op’s IT & digital transformation and incurring higher tax expenses,” he added.
Fonterra has also outlined that after several years of strong earnings performance, the co-op “exhausted its tax losses in FY24 and will now be paying tax”.
