Fon­terra records 11% profit drop

Shepparton News - Country News - - FRONT PAGE -

Fon­terra has posted an 11 per cent de­cline in full-year profit as mar­gins fell across its in­gre­di­ents and con­sumer and food ser­vice di­vi­sions.

The co-op­er­a­tive’s profit was $745 mil­lion in the 12 months ended July 31, from $834 mil­lion a year ear­lier, the Auck­land­based com­pany an­nounced on Mon­day.

Sales rose to $19.2 bil­lion from $17.2 bil­lion while cost of sales climbed to about $16 bil­lion from $13.6 bil­lion.

Ris­ing prices off­set a three per cent de­cline in vol­umes at 22.9 bil­lion litres of milk equiv­a­lent.

Nor­malised earn­ings be­fore interest and tax dropped 15 per cent to $1.2 bil­lion, which Fon­terra said re­flected ‘‘re­duced mar­gins across the busi­ness’’.

The fi­nal cash pay­out was $6.52 for the 2016-17 sea­son, for a 100 per cent share-backed farmer.

Chair John Wil­son said be­ing able to main­tain its fore­cast div­i­dend ‘‘de­spite the milk price in­creas­ing by 57 per cent over the year and the im­pact of neg­a­tive stream re­turns was an ex­cel­lent re­sult’’.

The re­sults in­clude an im­pair­ment loss of $35 mil­lion on Fon­terra’s in­vest­ment in Be­ing­mate, its dis­tri­bu­tion part­ner in China, re­duc­ing the car­ry­ing value to $617 mil­lion.

‘‘Through­out the year, Be­ing­mate’s shares traded sig­nif­i­cantly be­low the share price at the time Fon­terra ac­quired its in­vest­ment,’’ the com­pany said.

‘‘In ad­di­tion, Be­ing­mate re­ported losses for the full year ended De­cem­ber 2016 and the half year ended 30 June 2017.’’

Still, ‘‘the mar­ket fun­da­men­tals re­main strong and the changes to the reg­u­la­tory regime, an­tic­i­pated to be ef­fec­tive from 1 Jan­uary 2018, are ex­pected to have a pos­i­tive im­pact on Be­ing­mate’s fi­nan­cial per­for­mance,’’ it said.

The com­pany has also an­nounced it is plan­ning to grow its Aus­tralian milk sup­ply and pro­cess­ing ca­pac­ity now that it has firmly es­tab­lished its place in the do­mes­tic mar­ket and as a global in­gre­di­ents hub for Fon­terra’s cheese, whey and nu­tri­tion­als port­fo­lio.

Fon­terra Aus­tralia manag­ing direc­tor Rene´ De­doncker said the busi­ness was gen­er­at­ing sus­tain­able re­turns and was now look­ing to grow to meet higher de­mand for dairy.

‘‘We have hit all of our per­for­mance tar­gets, we have a clear strat­egy which is de­liv­er­ing and we have the right as­sets and prod­uct mix on the ground,’’ Mr De­doncker said.

‘‘We are now look­ing to build on that base with fur­ther expansion linked to grow­ing cus­tomer de­mand for con­sumer dairy, food ser­vice prod­ucts and dairy in­gre­di­ents.

‘‘With our plants full we will be ac­cel­er­at­ing our cap­i­tal in­vest­ments in re­gional Vic­to­ria and Tas­ma­nia, play­ing to our strengths in cheese, whey and nu­tri­tion­als.’’

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